Which One of the Following Statements Concerning Option Payoffs Is

question 62

Multiple Choice

Which one of the following statements concerning option payoffs is correct?

• A) The buyer of a call profits when the exercise price exceeds the market price.
• B) The buyer of a call profits when the strike price exceeds the exercise price.
• C) A put will only be exercised if both the seller and the buyer can profit.
• D) Both the buyer and the seller profit when a call is exercised.
• E) The seller of a put incurs a loss when a put is exercised.

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Definitions:

Continuous Auction Market

A continuous auction market is a type of financial market in which buy and sell orders are continuously matched throughout the trading day, allowing for instant trade execution.

Private Placements

Securities sold directly to a small number of private investors, rather than through a public offering.

SEC Rule 144A

This SEC rule provides a regulatory framework that allows the sale of privately placed securities to qualified institutional buyers without the need for public registration.

Circuit Breakers

Mechanisms used in stock exchanges to temporarily halt trading on an exchange to curb panic-selling, triggered by drastic drops in value.