The Buyer (Long) of a Put Option

question 54

Multiple Choice

The buyer (long) of a put option:

• A) has a maximum loss equal to the premium paid.
• B) has a gain equal to but opposite in sign to the writer of the option.
• C) has maximum gain potential limited to the difference between the strike price and the premium paid.
• D) all of the above

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Definitions:

Financial Risk

The possibility of losing money on an investment or business venture due to financial market fluctuations, interest rate changes, or bad management decisions.

Capital Structure

The blend of borrowed money and shareholder capital a corporation employs to support its operational and developmental needs.