If an Investor Buys a 100-Share Put Option for $400

question 150

Multiple Choice

If an investor buys a 100-share put option for $400 with an exercise price of $40 and the underlying price per share of the stock at expiration is $32, what is the amount of profit or loss, ignoring brokerage fees?

• A) There would be a profit of $800.
• B) There would be a profit of $400.
• C) There would be a loss of $400.
• D) There would be a loss of $800.

Recognize the significance of zero economic profits and what it implies about a firm’s performance relative to its alternatives.

Understand the conditions under which firms will enter or exit an industry based on economic profits.

Determine the effects of variable resource additions to fixed resources on production and cost.

Analyze the relationship between total product, marginal product, and average product in the context of production.

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Definitions:

Argument Making

The process of forming reasons, drawing conclusions, and applying them to a case in discussion; a method of presenting one's reasons.

Verbal Confrontation

Direct communication or exchange of ideas where disagreements or differences are expressed through spoken words.

Complex Decision Map

A diagram or tool that helps in analyzing and visualizing the factors and pathways involved in making a complicated decision.