Erin wrote a put option on Verizon stock with a striking price of $53 per share. At the expiration date, Verizon was selling for $50 per share. Which statement best describes the action that Erin should or must take?

Question

Quizplus · Accepted Answer

Erin wrote a put option, which gives the buyer the right to sell Verizon shares to Erin at the striking price of $53 per share. Since the market price at expiration is lower than the striking price, the buyer of the put option will exercise their right to sell the shares to Erin at $53 per share. Therefore, Erin is obliged to buy the shares at $53 per share, even though the market price is $50 per share.

Erin Wrote a Put Option on Verizon Stock with a Striking