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:

Sample Mean

The average value of a sample set of numbers, calculated by summing all the observations and dividing by the number of observations in the sample.

Population Average

The sum of all the values in a population divided by the number of values, representing the central tendency of the population data.

Standard Error

The standard deviation of the sampling distribution of a statistic, often used in the context of estimating the population mean.

Standard Error

The standard deviation of the sampling distribution of a statistic, often used to estimate the accuracy of sample mean estimates of population means.