There's a Call Option Written for 100 Shares of GM

question 102

Multiple Choice

There's a call option written for 100 shares of GM stock for $85.00 a share, prior to the third Friday of October 2017: The option writer:

• A) has the option but not the requirement of selling 100 shares of GM for $85.00.
• B) will sell 100 shares of GM for $85.00 on the third Friday of October 2017.
• C) has the option to back out of this contract prior to the third Friday of October 2017.
• D) is required to post margin.

---

Definitions:

Binding Price Floors

Government-imposed price minimums that are set above the equilibrium price, causing surpluses in the market.

Binding Price Ceilings

Government-imposed price limits that are set below the market equilibrium price, leading to shortages.

Market Efficiency

A condition in which market prices fully reflect all available information and assets are priced accordingly.

Price Ceiling

A government-imposed limit on how high a price can be charged on a product or service, typically set below the equilibrium price to make goods more affordable.