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Exam Series 6 topic 1 question 45 discussion

Actual exam question from FINRA's Series 6
Question #: 45
Topic #: 1
[All Series 6 Questions]

In mid-September, the stock of Oracle (ORCL) is selling for $25.60 a share. Ms. Hedge owns shares of Oracle and buys a put option on the stock with a strike price of $27 that expires in October for $2.20 per optioned share. Just prior to expiration, Oracles stock is selling for $29. Ms. Hedge should:

  • A. let her option expire worthless.
  • B. exercise her option and sell Oracle for $29 a share.
  • C. exercise her option and buy more shares of Oracle for $27 a share.
  • D. exercise her option and sell Oracle for $27 a share.
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Suggested Answer: A 🗳️
If Ms. Hedge owns a put option on Oracle with a strike price of $27 and Oracles price is $29 just prior to expiration, she should let her option expire worthless. Her put option gives her the right to sell Oracle for $27. If she wants to sell her existing shares of Oracle, she is better off doing so on the open market and receiving $29 a share for them.
by lolojepu at April 6, 2025, 1:12 a.m.

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