You Buy an At-The-Money Chooser Option

question 29

Multiple Choice

You buy an at-the-money chooser option.Immediately after you buy it,the price of the underlying increases very sharply.Other things remaining the same,the value of your chooser likely

• A)Increases.
• B)Decreases (the put now has no value).
• C)Remains constant (the increase in call value is canceled out by the decrease in put value).
• D)Goes to zero.

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Definitions:

Shares Issued

The total number of shares that a corporation has legally sold to shareholders, including those held by the public and by the company.

Preferred Stock

A class of ownership in a corporation with a higher claim on assets and earnings than common stock, usually with fixed dividends.

Net Income

The total profit or loss of a business after all expenses, including taxes and operating costs, have been deducted from total revenue.

Common Stock

A type of equity security that represents ownership in a corporation, giving the shareholder voting rights and a share in the company’s profits through dividends.