.What is the difference between a call option and a put option?*1 pointa. A call option gives the holder the right to buy an underlying asset, while a put option gives the holder the right to sell an underlying asset.b. A call option gives the holder the right to sell an underlying asset, while a put option gives the holder the right to buy an underlying asset.c. A call option and a put option are the same thing.d. A call option and a put option have no relation to buying or selling an underlying asset
Question
.What is the difference between a call option and a put option?*1 pointa. A call option gives the holder the right to buy an underlying asset, while a put option gives the holder the right to sell an underlying asset.b. A call option gives the holder the right to sell an underlying asset, while a put option gives the holder the right to buy an underlying asset.c. A call option and a put option are the same thing.d. A call option and a put option have no relation to buying or selling an underlying asset
Solution
The correct answer is a. A call option gives the holder the right to buy an underlying asset, while a put option gives the holder the right to sell an underlying asset.
Here's a step-by-step explanation:
-
A call option is a financial contract that gives the option holder the right, but not the obligation, to buy a specified amount of an underlying security at a pre-determined price (the strike price) within a specified time frame (until the expiration date).
-
A put option, on the other hand, is a financial contract that gives the option holder the right, but not the obligation, to sell a specified amount of an underlying security at a pre-determined price (the strike price) within a specified time frame (until the expiration date).
-
The key difference between the two lies in the transaction they enable. A call option is essentially a bet that the price of the underlying asset will increase, as it allows the holder to buy the asset at a lower price and potentially sell it later at a higher price. A put option is essentially a bet that the price of the underlying asset will decrease, as it allows the holder to sell the asset at a higher price and potentially buy it back later at a lower price.
-
Therefore, option a. is correct: A call option gives the holder the right to buy an underlying asset, while a put option gives the holder the right to sell an underlying asset.
Similar Questions
Which of the following statement describes an option contract and the major distinction between a call and a put option?Group of answer choicesAn option is defined as the right, but not the obligation, to buy or to sell a specified amount of a given stock, commodity, currency, index or debt, at a specified price (the strike price) for a specified period of time.A put option contract gives a buyer the right not the obligation to sell an underlying security at certain price specified in the put option contract.All of the given answers.A call option contract gives a buyer the right not the obligation to purchase an underlying security at certain price specified in the call option contract.
A ________ option is an option to purchase a specified number of shares on or before some future date at a specified price, whereas a _______ option is an option to sell a specified number of shares on or before some future date at a specified price. ______ are bought if the share is expected to rise.Question 1Select one:a.put; call; Putsb.call; put; Putsc.call; put; Callsd.put; call; Calls
Which of the following doesn't result in the closing of a long call option position?a.purchasing a put with the same expiration, strike, and underlying asset.b.letting the call go off-line.c.selling a call with the same underlying asset, strike price, and expiration.d.putting the call to use.
Which of the following statements is CORRECT?a.Put options give investors the right to buy a stock at a certain strike price before a specified date.b.Call options give investors the right to sell a stock at a certain strike price before a specified date.c.Options typically sell for less than their exercise value.d.An option holder is not entitled to receive dividends unless he or she exercises their option before the stock goes ex dividend.
In the options market, the right to buy an underlying asset lies with:Question 1Select one:a.call buyers.b.put buyers.c.European put buyers.d.writers of an option.
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.