The payoff to the holder of a put option is given by:
A)P = max(K - S,0)
B)P= max(S - K,0)
C)P = min(S - K,0)
D)P = max(K,0)
E)P = max(S - K,0)

Question

Quizplus · Accepted Answer

The payoff to the holder of a put option is given by P = max(K - S, 0), where K is the strike price and S is the spot price at expiration. This represents the maximum of either the difference between the strike price and the spot price (if the strike price is higher) or zero (if the spot price is higher, meaning the option is not exercised).

The Payoff to the Holder of a Put Option Is