An American Put option expiring 6 months from now on a certain stock has a strike price of $100 and the premium paid for the put was $20

Given that the investor is holding a American put option

A put option is a right to sell. Accordingly we will justify all the options below.

A) This is correct because when the strike price if 100 and spot price is 80 the investor will exercise the option and have a pay off of 80 this will net off with the option price 20.

B) When the spot price is moving the exercise price the invetor will lapse the option and the maximum loss he will face is the premium paid on the option that is $20 . Hence this statement is correct

C) For a writer of a put option will have an obligation to buy . So inorder to have an obligation we have to check from the holder point of view a buyer of the put option will exercise only when the spot price moved below the exercise at max the stock can fall to zero and the writer will have a loss of 100. However he has a cash inflow of 80 from the premium . Hence the maximum net loss will be 80 and hence this is a incorrect statement

D) The buyer will exercise if there is a profit of 60 because this profit is greater than the premium outflow. hence this is a correct statement