Steve Bought 300 Shares of Stock at a Price of $20

question 34

Multiple Choice

Steve bought 300 shares of stock at a price of $20 per share. The price of the stock then went up to $33 per share so Steve decided to hedge his position by purchasing 3 puts at a cost of $120 each. The puts have an exercise price of 30. One week prior to the expiration of the puts, the price of the stock was at $22 per share. If Steve closed out all of his positions at that time, he would have earned a net profit of

• A) $200.
• B) $240.
• C) $2,640.
• D) $3,000.

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Definitions:

Alternative Hypotheses

In statistical testing, a hypothesis that suggests a difference or effect contrary to the null hypothesis, essentially proposing that an observed effect is real.

Null

In statistics, this refers to the null hypothesis, which is a default hypothesis that there is no significant difference or effect.

Average Profit

The mean financial gain computed by dividing the total profit by the number of units sold or transactions, providing insight into overall profitability.

Degrees of Freedom

The number of independent values or quantities which can be assigned to a statistical distribution without violating any constraints.