1. If the option is exercised, a call writer must a. Purchase the underlying ass
ID: 2808828 • Letter: 1
Question
1. If the option is exercised, a call writer must
a. Purchase the underlying asset from the call buyer
b. Purchase the underlying asset from the put writer
c. Purchase the underlying asset from the put buyer
d. Sell the underlying asset to the put buyer
e. Sell the underlying asset to the call buyer
2. A put option on a stock is a contract to
a. Purchase the stock at the premium price
b. Sell the stock at the strike price
c. Purchase the stock at the strike price
d. Sell the stock at the premium price
e. Purchase the stock at the market price
3. A stock is selling for $59.07 per share. A call option on the stock has a $56 strike price and a $2.40 premium. The call is:
a.Out of the money because the option's premium is below the stock's market price
b. Out of the money because the option premium is below the option strike price
c. Out of the money because the option's strike price is below the stock's market price
d. In the money because the option premium is below the option strike price
e. In the money, because the option's strike price is below the stock's market price
a. Purchase the underlying asset from the call buyer
b. Purchase the underlying asset from the put writer
c. Purchase the underlying asset from the put buyer
d. Sell the underlying asset to the put buyer
e. Sell the underlying asset to the call buyer
Explanation / Answer
1)
Call option is an option at the right of buyer. Buyer of option can purchase the stock at the strike specified in option contract. If the buyer exercises the option, seller/writer of option should sell the stock at strike price.
Hence, correct option is “e. Sell the underlying asset to the call buyer”
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