You Write a Put Option on a Share

question 47

Multiple Choice

You write a put option on a share. The profit at contract maturity of the option position is ________ where X equals the option's strike price, ST is the share price at contract expiration and P0 is the original premium of the put option.

• A)Max(P₀, X - S_T - P₀)
• B)Min(-P₀, X - S_T - P₀)
• C)Min(P₀, S_T - X + P₀)
• D)Max(0, S_T - X - P₀)

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Definitions:

Imperative

Something that is necessary or of great importance, often used in the context of commands or duties.

Maxim

A short, pithy statement expressing a general truth or rule of conduct.

Agent's Reasons

Refers to the motivations or underlying reasons that drive an individual's decisions or actions.

Morality

Guidelines that separate commendable from condemnable actions.