Which of the following statements about put options is correct?
A) If the option writer exercises the put option, the option holder has to sell the underlying asset to him or her.
B) If the option writer exercises the put option, the option holder has to buy the underlying asset from him or her.
C) If the option holder exercises the put option, the option writer has to buy the underlying asset from him or her.
D) If the option holder exercises the put option, the option writer has to sell the underlying asset to him or her.

Question

Quizplus · Accepted Answer

A put option gives the option holder the right to sell the underlying asset at a specified price (strike price) to the option writer. If the option holder exercises the put option, the option writer (seller) is obligated to buy the underlying asset from the option holder at the strike price. Therefore, statement C is correct. Statements A, B, and D are incorrect.

Which of the Following Statements About Put Options Is Correct