Which One of the Following Is True for the Owner

question 12

Multiple Choice

Which one of the following is true for the owner of a call option?

• A) The loss potential is unlimited.
• B) The profit potential is unlimited.
• C) The option price exceeds the exercise price.
• D) There is no expiration date, unless the option is a European call.

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Definitions:

Shares Issued

The number of shares that have been allocated and are held by shareholders, including both public investors and company insiders or affiliates.

Treasury Stock

Stocks that have been initially distributed and then bought back by the company that issued them, thus decreasing the quantity of available shares in the market.

Contra Equity Account

An equity account where balances are opposite to the normal accounts and are used to reduce the value of equity accounts.

Voting Rights

The entitlements of shareholders to vote on company matters, typically proportional to the number of shares they hold.