A Put Option Is Purchased for a Premium of $200

question 43

Essay

A put option is purchased for a premium of $200 with an exercise price of $38 per share and a current market price on the stock of $41 per share.What would be the return if the market price declines to $35 per share and the stock is purchased and the option exercised? Ignore taxes and brokerage commissions.Round to the nearest percentage if necessary.
(a)9 percent
(b)15 percent
(c)50 percent
(d)100 percent

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Definitions:

Open Questions

Inquiries that are designed to encourage a full, meaningful answer using the subject's own knowledge and/or feelings.

Attentive Statements

Responses that show active listening and understanding of what another person is expressing.

Minimal Encouragers

Brief verbal cues or non-verbal signals used during conversation to indicate active listening and encourage the speaker to continue.

Reflecting Feelings

The technique used in counseling and communication to mirror the emotions of the speaker, validating their experience.