SIE Exam Question 256: Answer and Explanation

Question: 256

Exercise of an equity put option involves the writer:

• A. selling the underlying instrument at the strike price
• B. buying the underlying instrument at the strike price
• C. selling the underlying instrument at the strike price less premium
• D. buying the underlying instrument at the strike price less premium

Correct Answer: B

Explanation:

B: When an investor shorts/writes/sells a put option, they agree to be OBLIGATED to BUY the underlying instrument at the strike price.