The Seller of a Put Option Is Transferring the Risk

question 47

Multiple Choice

The seller of a put option is transferring the risk:

• A) of a price decrease of the stock to the buyer of the option.
• B) of a price increase of the stock to the buyer of the option.
• C) this statement is incorrect since options do not transfer risk.
• D) this statement is incorrect since only sellers of call options are transferring risk.

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Definitions:

Negative Reinforcement

A stimulus that, when removed after a specific behavior, increases the likelihood of that behavior being exhibited again.

Unpleasant Stimulus

A negative or disagreeable input or event that affects an individual's mental or physical state.

Pleasant Stimulus

A stimulus that is enjoyable or pleasing to the senses.

Variable-interval Schedule

A reinforcement schedule where a response is rewarded after an unpredictable amount of time has passed.