When a put option is exercised, the:
A)seller of the option receives the strike price.
B)seller of the option receives the option premium.
C)buyer of the option sells the underlying asset and receives the option premium.
D)buyer of the option pays the option premium and receives the underlying asset.
E)seller of the option must buy the underlying asset and pay the strike price.

Question

Quizplus · Accepted Answer

When a put option is exercised, the buyer of the option has the right to sell the underlying asset at the strike price to the seller of the option. Therefore, the seller of the option must buy the underlying asset at the strike price, which is the obligation they agreed to when they sold the put option. The buyer of the option pays the option premium upfront and receives the strike price when they exercise the option.

When a Put Option Is Exercised, The