The payoff to the holder of a put option is ________.
A) strike price minus stock price if stock price is more than strike price
B) strike price minus stock price if stock price is less than strike price
C) stock price minus strike price if stock price is less than strike price
D) stock price minus strike price if stock price is more than strike price

Question

Quizplus · Accepted Answer

The payoff to the holder of a put option is the strike price minus the stock price, but only when the stock price is less than the strike price. This is because a put option gives the holder the right to sell the underlying asset at the strike price, which is beneficial if the market price is below the strike price.

The Payoff to the Holder of a Put Option Is