A put option on a stock has an exercise price of $74.If the stock price at expiration is $79,what is the option payoff for a long put position?
A)$0
B)$5
C)-$5
D)$79
E)-$79

Question

Quizplus · Accepted Answer

A put option gives the holder the right to sell the underlying asset at the exercise price. If the stock price at expiration ($79) is higher than the exercise price ($74), the option will not be exercised because selling the stock in the market would yield a higher amount. Therefore, the option expires worthless, and the payoff is $0.

A Put Option on a Stock Has an Exercise Price