You own 400 shares of ABC stock. You think the market price will continue to rise buy would like to ensure that you can get at least $35 a share when you decide to sell your shares. The 35 call option has a quoted price of $1.10 and the 35 put option is quoted at $0.10. How much will it cost you to ensure that you can sell all of your shares for at least $35 each?
A) $4
B) $40
C) $360
D) $400
E) $440

Question

Quizplus · Accepted Answer

To ensure you can sell all your shares for at least $35 each, you would buy put options. The cost of one put option (which typically covers 100 shares) at $0.10 is $10 (since 1 option contract = 100 shares, and the quoted price is per share). For 400 shares, you would need 4 contracts, costing $10 each, totaling $40.

You Own 400 Shares of ABC Stock