Suppose a share is trading for $25 in the current period. You enter into a contract with another trader that once the last trading period ends you will sell 100 shares to this other trader for $18 per share. You are expecting to make a profit from this contract. This implies that:
A) You expect the market price to drop to less than $18 per share by the last trading period.
B) You expect the market price to remain above $18 per share even in the last trading period
C) You expect the market price to drop to less than $25 but stay above $18 by the last trading period.
D) You expect the market price to go up above $25 even in the last trading period.

Question

Quizplus · Accepted Answer

If you expect to make a profit by agreeing to sell shares at $18 each, it implies you anticipate the market price will be lower than $18 by the time you sell, making your sale at $18 profitable compared to the market price.

Suppose a Share Is Trading for $25 in the Current