Series 7 practice questioneasyOptions — Put Options Basics
A put option gives the holder the right to do which of the following?
- ABuy the underlying stock at the market price
- BSell the underlying stock at the market price
- CBuy the underlying stock at the strike price before expiration
- DSell the underlying stock at the strike price before expiration✓ Correct answer
Explanation
Why D — Sell the underlying stock at the strike price before expiration
A put option gives the holder the right to sell the underlying security at the strike price on or before expiration. The put buyer profits when the price of the underlying security declines below the strike price minus the premium paid.
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