Explanation:
The payoff on the put option is zero because it expires out of the money. Profit to the put option buyer is zero minus the premium paid, or −$3.
(Book 3, Module 30.1, LO 30.d)
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Question 32
A European-style put option on a stock has an exercise price of $34 and a premium of $3. If the price of the underlying stock is $39 on the exercise date, the profit for the option buyer is:
A
−$3.
B
$0.
C
$2.
D
$5.
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