ICMA Exam FMFQ Topic 3 Question 70 Discussion

Actual exam question for ICMA's FMFQ exam

Question #: 70
Topic #: 3

You have sold a put on a stock at a strike of EUR 46 for a premium of EUR 2.80. What is your maximum profit on this deal?

ACannot say - it depends on market movements

BEUR 46.00

CEUR 43.20

DEUR 2.80

Show Suggested Answer

Suggested Answer: D

by Renay at Sep 15, 2024, 11:15 AM

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Carey

2 months ago

Ah, the old put-selling gambit. Just be careful, amigo, or you might end up with a stock you don't want at a price you don't like. But hey, if you're feeling lucky, go for it!

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Roxane

2 months ago

I dunno, it seems like the market could always surprise you. I'm going with A - can't say for sure until we see what the stock does.

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Santos

1 months ago

User 3: I agree, it's hard to determine the maximum profit until the stock price changes.

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Edna

1 months ago

Yeah, you're right. The market can be unpredictable.

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Veronika

2 months ago

I think it's A) Cannot say - it depends on market movements.

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Carissa

2 months ago

This one's a cinch! The maximum profit is the premium you collected, which is EUR 2.80. Simple as that.

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Shoshana

2 months ago

Option D sounds right to me. The premium you received is your maximum profit, no matter what happens to the stock price. Easy money!

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Linette

2 months ago

Exactly, selling a put option can be a good way to generate income if you don't mind potentially buying the stock at the strike price.

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Wayne

2 months ago

So, even if the stock price drops below the strike price, your profit is still capped at EUR 2.80.

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William

2 months ago

Yes, that's correct. The maximum profit is the premium you received, which is EUR 2.80.

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Yasuko

2 months ago

Option D sounds right to me. The premium you received is your maximum profit, no matter what happens to the stock price. Easy money!

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Lauran

3 months ago

I'm not sure, but I think the maximum profit depends on market movements, so it could vary.

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Antonio

3 months ago

I agree with Brinda, the maximum profit is EUR 2.80 because that's the premium received.

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Sherita

3 months ago

Hmm, I think the correct answer is C. EUR 43.20. You sold the put at 46, and the premium was 2.80, so your max profit is the difference between those two, which is 43.20.

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