The Buyer of a Call Option Has the Right to Exercise

question 47

Multiple Choice

The buyer of a call option has the right to exercise, but the writer of the call option has:

• A) The choice to offset with a put option
• B) The obligation to deliver the shares at exercise price
• C) The choice to deliver shares or take a cash payoff
• D) The choice of exercising the call or not

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Definitions:

Cognitive Misers

A theory suggesting individuals prefer to minimize mental effort in decision making and problem solving, relying on heuristics and shortcuts.

Observing Behavior

The act of watching or noting the actions of individuals or groups for the purpose of analysis or study.

Attribution Theory

The view that people act as intuitive scientists when they observe other people’s behavior and infer explanations about why those people acted the way they did.

Intuitive Scientists

A theory suggesting that people often act like amateur scientists, attempting to understand and predict other people's behavior by forming hypotheses and making deductions.