Suppose You Came Across the Following Headline in a Story

question 8

Essay

Suppose you came across the following headline in a story of a daily newspaper: "Automobile prices are so high right now that there must be a shortage. As a consequence not everyone who needs an automobile will be able to buy one." Is this statement necessarily correct?

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Definitions:

Strike Price

The specified price at which the buyer of an option can buy (call) or sell (put) the underlying security or commodity.

Put Options

Options contracts that give holders the right, but not the obligation, to sell a specified amount of an underlying asset at a set price within a specified time.

Exercise Price

The predetermined price at which the holder of an option can buy (for a call option) or sell (for a put option) the underlying asset.

Call Options

Call options are financial contracts that give the option buyer the right, but not the obligation, to buy a specified quantity of an asset at a predetermined price within a set time frame.