A Put Option on a Stock Has an Exercise Price

question 22

Multiple Choice

A put option on a stock has an exercise price of $42.If the stock price at expiration is $35,what is the option payoff for a short put position?

• A)$0
• B)$7
• C)-$7
• D)$35
• E)-$35

---

Definitions:

Gap-Filling

Refers to the method used by courts or parties to resolve ambiguities or omissions in contracts, often by applying standard provisions or reasonable interpretations.

Presumptions

Beliefs or assumptions accepted as true on the basis of probabilities without direct evidence or proof.

Mailbox Rule

A legal principle that an offer is considered accepted once the acceptance is dispatched by the offeree, not when it is received by the offeror.

Dispatched

The process of sending off to a destination or for a purpose, often used in contexts of mail, orders, or tasks being sent out or completed.