Suppose an investor sells (writes) a put option. What will happen if the stock price on...

Suppose an investor sells (writes) a put option. What will happen if the stock price on the exercise date exceeds the exercise price?

answer choices

a.The seller will need to deliver stock to the owner of the option.

b.The seller will be obliged to buy stock from the owner of the option.

c.The owner will not exercise his option.

d.The option will extend for nine more months.

Solutions

Expert Solution

Ans c.The owner will not exercise his option.

Since at the exercise date the price of stock exceed the exercise price, the buyer of the option will sell the stock in the market instead of selling it to the seller of the option. So, the buyer of the option will not exercise the option.

jeff jeffy answered 2 years ago

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