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.

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Definitions:

Implied Authority

Power that is not explicitly granted but is assumed to be authorized due to the nature of an individual's position or relationship.

Joint Venture

A business arrangement where two or more parties agree to pool their resources for the purpose of accomplishing a specific task.

Single Project

A single project refers to an undertaking designed to achieve a particular objective within a specified timeframe, typically involving a defined set of resources and tasks.

Co-ownership

A legal arrangement where two or more parties hold property together, sharing rights and responsibilities.