Writers of Option Contracts

question 126

Multiple Choice

Writers of option contracts

• A) have a limited liability specified in the contract.
• B) hope to exercise the option on favorable terms.
• C) earn a commission no matter what subsequently happens to the contract.
• D) earn a profit when the option expires without being exercised.

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Definitions:

Altruistic Motives

Altruistic motives are actions or behaviors driven by the desire to help others without expecting personal gain.

Consumer Good

Goods that are produced for personal consumption by the general public.

Inelastic

Describing demand that is relatively unresponsive to changes in price.

Quantity Demanded

This is the total amount of a good or service that consumers want to buy at a specific price level, within a certain period.