Which of the following gives the holder the right to sell the asset at a specified strike price? OA. A stock OB. A put OC. An ETF D. A future contract OE. A call ...
Which of the following gives the holder the right to sell the asset at a specified strike price? OA. A stock OB. A put OC. An ETF D. A future contract OE. A call ...
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:**Question:**
Which of the following gives the holder the right to sell the asset at a specified strike price?
**Options:**
- A. A stock
- B. A put
- C. An ETF
- D. A future contract
- E. A call
**Explanation:**
This multiple-choice question is focused on options trading. It asks which financial instrument gives the holder the right to sell an asset at a predetermined strike price.
**Correct Answer: B. A put**
A put option grants the holder the right, but not the obligation, to sell a specified amount of an underlying asset at a set strike price within a certain time frame. This is used typically when the holder expects the asset's price to decline.
Expert Solution
Step 1
Solution:-
Strike price is the price which is fixed in the beginning of the contract. If actual price of the stock crosses the strike price, the option gets exercised.
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