Which of the following statements concerning put options are correct?
A) The writer of a put profits if the price of the underlying stock rises.
B) The writer of a put profits if the price of the underlying stock falls.
C) The owner of a put profits if the price of the underlying stock rises.
D) Both the owner and writer of a put profit when the price of the underlying stock falls.

Question

Quizplus · Accepted Answer

The writer (seller) of a put option profits when the price of the underlying stock rises because the option is less likely to be exercised by the owner, allowing the writer to keep the premium paid for the option without having to buy the stock at the strike price.

Which of the Following Statements Concerning Put Options Are Correct