Suppose You Bought 10 Smith Enterprise Put Options with a Strike

question 62

Multiple Choice

Suppose you bought 10 Smith Enterprise put options with a strike price of $52 at $2.75 per option.If the price of Smith stock is $56,what is your net profit (or loss) ? Ignore transaction costs.

• A) $40
• B) $0
• C) -$27.50
• D) $12.50

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Definitions:

FIFO Discipline

First In, First Out Discipline is a queue management principle where the first item or task to arrive is the first to be processed or completed.

Normal Curve

A bell-shaped curve that represents the distribution of many types of data where most of the occurrences take place around the average.

M/M/1 Model

is a type of queueing model used in operations research to describe systems with a single server, where arrivals are determined by a Poisson process and service times have an exponential distribution.

First Customers

The initial group of buyers or users who purchase or adopt a product or service shortly after its launch.