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:

Chancre

A painless ulcer, typically the first sign of syphilis.

Syphilis

A bacterial infection usually spread by sexual contact, marked by sores and rashes.

Cunnilingus

A sexual act involving the stimulation of the female genitals using the mouth or tongue.

Menstruating

The monthly process in which the lining of the uterus is shed through the vagina, a natural part of the female reproductive cycle.