Question

Jeff opted to exercise his August option on August 10 and received $2,500 in exchange for his shares. Jeff must have owned a(an):_______
a. Warrant.
b. American call.
c. American put.
d. European call
e. European put.

Answer 1

Answer:

c. American put.

Explanation:

American options are defined as the type of contract that allows owner to exercise his option rights on any date of his choosing. This can even be on the date of expiration of the option.

European option on the other hand only allows option rights on the day of expiration of the option contract.

American put option allows the owner sell his option at any period within the contract life.

In the given scenario Jeff decided to sell his August options on on the 10th of August (before the expiry date). In exchange he recieved cash of $2,500.