Kyle believes the price of Ajax stock is about to decrease. If he wants to profit from the decline in price, he should ______on Ajax stock.
A) buy a call
B) write a put
C) buy a put
D) sell a put

Question

Quizplus · Accepted Answer

Buying a put option gives Kyle the right, but not the obligation, to sell the stock at a predetermined price. If the stock's price decreases, the value of the put option increases, allowing him to sell the stock at a higher price than the current market price, thus profiting from the decline.

Kyle Believes the Price of Ajax Stock Is About to Decrease