A Speculator Purchases a Put Option for a Premium of $4

question 71

Multiple Choice

A speculator purchases a put option for a premium of $4, with an exercise price of $30. The stock is presently priced at $29, and rises to $32 before the expiration date. What is the maximum profit per unit to the speculator who owned the put option assuming he or she exercises the option at the ideal time?

• A)-$4
• B)-$3
• C)-$2
• D)$2
• E)$3

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Definitions:

Kellogg's

An American multinational food manufacturing company known for producing cereals and convenience foods.

Breakfast Cereals

A variety of processed cereal grains that are typically eaten as a first meal of the day with milk.

Core Question

The fundamental or main question that underlines the focus or intent of a survey, study, discussion, or investigation.

Confectionary Products

Sweet food items, including chocolates, candies, and gum.