Question

the seller of an option, you receive the: exercise price B. strike price crisk premium D. exercising premium. E option premium 35. Which of the following depicts the profit/loss diagram for selling a call option Graph D Graph A Graph Graph B profit profit profit profit loss loss loss loss A. Graph A B. Graph B C. Graph C D. Graph D E. None of the above 36. Which of the following depicts the profit/loss diagram for selling a put option? Graph A Graph B Graph C Graph D pro profit profit profit loss loss loss loss A. Graph A B. Graph B C. Graph C D. Graph D E None of the above

Answer 1

34. Option C is correct

The seller of the call option would receive the risk premium.

35. Option B is correct

Graph B correctly represents the P&L diagram of a call option seller.

Profit is limited for a call option seller and the loss begins to increase when the stock prices goes beyond the exercise price.

36. Option D is correct.

Graph D correctly represents the P&L diagram of a put option seller.

Profit is limited for a put option seller and the loss begins to increase when the stock prices drops below the exercise price.

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