Option Payoffs: What Is the Payoff for a Put Option

question 24

Multiple Choice

Option payoffs: What is the payoff for a put option with a strike price of $20 if the price of the underlying stock at expiration is $18?

• A) $0
• B) $2
• C) $18
• D) $20

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Definitions:

Belief Perseverance

The tendency to maintain one's belief even in the face of contradictory evidence.

Overconfidence Phenomenon

A cognitive bias where a person's subjective confidence in their judgments is reliably greater than their objective accuracy.

Preconceptions

Ideas or opinions formed before having the evidence for their truth or usefulness, often acting as biases or assumptions.

Framing

In social psychology, the way information is presented to the audience, which influences the choices people make by highlighting certain aspects and downplaying others.