The purchaser of a put option expects the stock price to
A) fall.
B) double.
C) remain level.

Question

Quizplus · Accepted Answer

A put option gives the purchaser the right but not the obligation to sell the underlying stock at a predetermined price (strike price) before the expiration date. The purchaser buys a put option if they expect the stock price to fall, and they can then sell the stock at a higher strike price, making a profit from the difference. Thus, the best choice is A) fall. The other options are not relevant to the expectations of a put option purchaser.

The Purchaser of a Put Option Expects the Stock Price