Options Can Be Used for Speculation

question 30

Multiple Choice

Options can be used for speculation. If you believe that the spot price of T-bills is going to be much lower 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:

Reinforcement Theory

A psychological perspective focusing on how outcomes of behaviors affect the likelihood of those behaviors being repeated.

Focal Objects

Core items or subjects in a study or a field of interest that attract primary attention or analysis.

Physical Things

Objects or substances that have a tangible presence and can be perceived through the senses.

Attribution Theory

A psychological theory that attempts to explain how individuals determine the causes of others' behavior, attributing it to internal dispositions or to external situations.