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 provides the holder with the right to sell the underlying stock at any time during the option period at a specified price, even if the market price of the stock declines to zero. This is because the option holder can exercise the put option and sell the stock at the specified price, thereby limiting their losses. In contrast, a European put option only allows the holder to exercise the option at the expiration date, which may not be useful if the market price of the stock declines significantly before expiration. Therefore, an American put option is the best choice for this scenario.

Which One of the Following Provides the Option of Selling