You Will Earn a Profit as the Owner of a Call

question 54

Multiple Choice

You will earn a profit as the owner of a call option if the price of the underlying asset:

• A)decreases.
• B)remains constant or decreases.
• C)remains constant.
• D)remains constant or increases.
• E)increases.

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Definitions:

Unique-Event

A singular occurrence that is distinct in nature, not expected to repeat under normal circumstances.

Probability

The measure of the likelihood that an event will occur, quantified as a number between 0 and 1.

Bullwhip Effect

A phenomenon in supply chains where small fluctuations in demand at the retail level cause progressively larger fluctuations in demand at the wholesale, distributor, and manufacturer levels.

Order Size

The quantity of goods a company purchases or produces in a single order to meet its demand while minimizing costs.