A long put position
A) has a value of zero if the stock price is below the exercise price.
B) has a value equal to the stock price minus the exercise price if the stock price is above the exercise price.
C) has a value of zero if the stock price at the time of purchase exceeds the expected stock price at option expiration.
D) has a value equal to the exercise price minus the stock price if the stock price is below the exercise price.

Question

Quizplus · Accepted Answer

A long put position gives the option holder the right, but not the obligation, to sell the underlying asset at the exercise price. Therefore, if the stock price is below the exercise price, the holder can sell at a higher price, making a profit. The profit is equal to the exercise price minus the stock price, which is the value of the long put option. If the stock price is above the exercise price, the holder would not exercise the option and the value would be zero. If the stock price at the time of purchase exceeds the expected stock price at option expiration, it does not affect the value of the long put option as it depends on the relationship between the stock price and exercise price at expiration.

A Long Put Position