You Sold Ten Put Option Contracts on PLT with an Exercise

question 35

Multiple Choice

You sold ten put option contracts on PLT with an exercise price of €32.50 and an option price of €1.10.Today,the option expires and the underlying share is selling for €34.30 a share.Ignoring trading costs and taxes,what is your total profit or loss onthis investment?

• A)-€2,900
• B)-€1,100
• C)€700
• D)€1,100
• E)€2,900

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Definitions:

Oral Contract

A verbal agreement between parties that is legally binding, although difficult to prove in court without witnesses or supporting documentation.

Written Confirmation

A document that provides proof of an agreement or transaction, detailing the specific terms and conditions agreed upon by the parties involved.

Finance Leases

A type of lease where the lessee has use of the asset for most of its useful life and the lease payments are designed to cover the full cost of the asset, along with interest.

Truth In Lending Act

A U.S. federal law designed to promote informed use of consumer credit by requiring disclosures about its terms and cost.