Which of the following statements is true of an option's payoff?

Question

Quizplus · Accepted Answer

The gross payoff of an option is the total amount received from exercise or sale of the option, while the net payoff is the gross payoff minus the cost of the option. Therefore, depending on the cost of the option, the gross payoff can be greater or less than the net payoff. Choice A is incorrect because the gross payoff could be less than the net payoff if the cost of the option is high. Choice B is incorrect because the gross payoff cannot be less than zero. Choice D is incorrect because there are some scenarios where the gross payoff is not equal to the net payoff.

Which of the Following Statements Is True of an Option's