You have written a put option on ABC stock. The exercise price is $30 and the current stock price is $31.The option payoff wills _________ if the stock price increases by $1 and the payoff will _________ if the stock price decreases by $1.
A) Increase; decrease
B) Decrease; increase
C) Remain the same; increase
D) Remain the same; decrease
E) Remain the same; remain the same

Question

Quizplus · Accepted Answer

The payoff of a put option is determined by the difference between the exercise price and the stock price, only if the stock price is below the exercise price. Since the current stock price is above the exercise price, changes in the stock price do not affect the payoff.

You Have Written a Put Option on ABC Stock