ZXC stock is currently priced at $42.27 a share. The six-month puts are priced at $0.80 and have a $42.50 strike price. Fred owns 1,000 shares of ZXC stock and wants to sell it for the best possible price. Fred should:
A) Buy 10 puts and then exercise them immediately.
B) Buy 1 put and then exercise it immediately.
C) Sell 10 puts and then exercise them immediately.
D) Sell 1 put and then exercise it immediately.
E) Sell the shares directly at the market price.

Question

Quizplus · Accepted Answer

Selling the shares directly at the market price is the best option for Fred if he wants to sell his shares for the best possible price. Buying or selling puts and then exercising them immediately does not make sense in this context, as exercising a put option allows the holder to sell shares at the strike price, which is slightly higher than the market price but would incur the cost of the put itself, reducing the overall proceeds. Selling the shares directly avoids any additional costs and takes advantage of the current market price.

ZXC Stock Is Currently Priced at $42