An American put option allows the holder to
A)buy the underlying asset at the striking price on or before the expiration date.
B)sell the underlying asset at the striking price on or before the expiration date.
C)potentially benefit from a stock price increase.
D)sell the underlying asset at the striking price on or before the expiration date and potentially benefit from a stock price increase.

Question

Quizplus · Accepted Answer

An American put option gives the holder the right to sell the underlying asset at the striking price on or before the expiration date. This allows the holder to potentially benefit from a decline in the stock price. Option A is describing an American call option, not a put option. Option C is not true for put options, as they provide the holder with the opportunity to make a profit when the stock price decreases. Option D is partially true, but it is important to note that the holder of a put option would only benefit from a stock price increase if they held a short position in the underlying asset.

An American Put Option Allows the Holder to