The Seller of an Option Has the

question 52

Multiple Choice

The seller of an option has the

• A) right to buy or sell the underlying asset.
• B) the obligation to buy or sell the underlying asset.
• C) ability to reduce transaction risk.
• D) right to exchange one payment stream for another.

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Definitions:

Earnings Per Share

A profitability measure that indicates the portion of a company's profit allocated to each outstanding share of common stock, calculated as net income minus dividends on preferred stock divided by the average outstanding shares.

Earnings Before Taxes

A company's profit before taxation is deducted.

Industry Average

A statistical measure representing the typical performance within a particular industry, serving as a benchmark for evaluating individual companies.

Du Pont Identity

A formula that decomposes a company's return on equity into three components: profit margin, asset turnover, and financial leverage.