When assessing the profitability of an options trade we can say that the maximum loss the writer of a stock Put option can suffer is ________. (more difficult)
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Arthur owns 100 shares of Chevron (CVX), which he purchased 6 months ago for $75.00 per share. CVX is currently trading at $110.00, but Arthur is reluctant to sell (for tax reasons). Arthur really wants to lock in his current level of profit for at least six months, so he purchases a put option on CVX with a strike price of $100.00. Arthur pays a premium of only $1.00. If the price of CVX drops to $80.00 per share, which of the following is most correct about Arthur's total gains and losses? Arthur will lose a total of $20.00. Arthur will lose a total of $2,000.00. Arthur will lose $30 per share on the stock but will gain at least $19 per share on the put option. Arthur will be forced to sell his shares of CVX.
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