A put option on a stock has an exercise price of $42.If the stock price at expiration is $35,what is the option payoff for a short put position?
A)$0
B)$7
C)-$7
D)$35
E)-$35

Question

Quizplus · Accepted Answer

The option is in-the-money since the stock price is below the exercise price. The option payoff for a short position is given by the exercise price minus the stock price, which is $42 - $35 = $7. However, since it is a short position, the payoff has to be negative, resulting in a payoff of -$7. Therefore, the correct choice is C.

A Put Option on a Stock Has an Exercise Price