Options Can Be Used for Speculation

question 83

Multiple Choice

Options can be used for speculation. If you believe that the spot price of T-bills is going to be much higher by next June, which of the following would be the best way to act on this belief? For simplicity, assume that the strike price and the spot price are about equal.

• A)You could sell a put option
• B)You could buy a put option.
• C)You could buy a call option.
• D)You could sell a call option.

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Definitions:

Allergy

An immune system response to a foreign substance (allergen) that is not typically harmful to the body. This reaction can cause various symptoms, such as sneezing, itching, and swelling.

Itchy Eyes

A sensation that leads to the desire to rub the eyes, often caused by allergies, infections, or dryness.

Common Cold

A viral infection of the nose and throat, which is minor and self-limiting, characterized by sneezing, coughing, and a runny nose.

Influenza

A contagious respiratory illness caused by influenza viruses, characterized by fever, cough, and muscle aches.