A Speculator May Write a Put Option on Stock with an Exercise

question 6

Multiple Choice

A speculator may write a put option on stock with an exercise price of $15 and earn a $3 premium only if he thought

• A)the stock price would stay above $12.
• B)the stock volatility would increase.
• C)the stock price would fall below $18.
• D)the stock price would stay above $15.
• E)the stock price would rise above $18 or fall below $12.

---

Definitions:

Distribution

The process of making a product or service available for use or consumption by a consumer or business user, using direct or indirect means.

Economy of Scale

Cost advantages that enterprises obtain due to their scale of operation, with cost per unit of output generally decreasing with increasing scale.

Small Manufacturers

Companies engaged in the production of goods on a smaller scale, often characterized by more specialized products or services.

Cottages

Small, typically cozy houses, often located in rural or vacation settings, and sometimes used as secondary homes or vacation retreats.