Owning a Call Option That Has a High Probability of Being

question 6

Multiple Choice

Owning a call option that has a high probability of being exercised is said to be equivalent to owning the stock.In which way is owning a call not equivalent to owning the stock?

• A)Option holders pay no income taxes.
• B)Shareholders do not have capped (restricted) profits.
• C)Option holders do not receive dividends.
• D)Shareholders cannot sustain losses.

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Definitions:

Initial State

The starting condition or situation from which a process, action, or system begins.

Goal State

The desired final condition or achievement a person or a system aims to reach.

Problem Solving

Problem solving is the cognitive process of finding a solution to a challenging situation or overcoming a barrier through logical thinking, creativity, and decision-making strategies.

Means-End Analysis

A problem-solving method that involves identifying the difference between the current state and the goal state, then creating and taking steps to reduce the difference.