Which of the Following Statements About Put and Call Options

question 143

Multiple Choice

Which of the following statements about put and call options is false?

• A) They are a form of deferred equity financing by the firm.
• B) They are traded on organized exchanges.
• C) They provide the buyer with an opportunity to earn larger returns than simply buying or selling common stock.
• D) They can be used to lock in a gain or prevent a loss on a stock holding.

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Definitions:

Optimal Choice

The best possible selection among various alternatives, considering constraints and objectives, to maximize or minimize desired factors such as utility, profit, or costs.

Consumer

An individual or group that purchases goods and services for personal use and not for manufacture or resale.

Marginal Utility

The additional satisfaction or benefit gained from consuming one more unit of a good or service.

Pretzels

A type of baked pastry made from dough that is commonly shaped into a knot and often salted.