Which one of the following provides the option of selling a stock anytime during the option period at a speciﬁed price even if the market price of the stock declines to zero?

Question

Quizplus · Accepted Answer

An American put option gives the owner the right but not the obligation to sell the underlying asset (in this case, a stock) at a specified price (strike price) anytime during the option period, regardless of the market price of the stock. This means that if the market price of the stock declines to zero, the owner can still sell the stock at the specified price, giving them protection against potential losses. The option can be exercised (or sold) at any time before the expiration date, unlike a European put option, which can only be exercised on the expiration date. Therefore, choice C, an American put option, is the best choice for this scenario.

Which One of the Following Provides the Option of Selling