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SIE: Options
SIE practice questionhardOptions - Put Writing

An investor writes (sells) a put option, and the stock falls below the strike price. The investor must:

  1. AReceive a dividend from the issuer
  2. BDeliver the stock if exercised
  3. CPurchase the stock at the strike price if exercised✓ Correct answer
  4. DBuy a call to hedge the position
Explanation

Why CPurchase the stock at the strike price if exercised

Put writers must buy the underlying if assigned. They do not deliver, receive dividends, or automatically buy calls.

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