Under What Circumstances Can the Writer of a Call Option

question 6

Multiple Choice

Under what circumstances can the writer of a call option expect to profit?

• A)Stock price declines
• B)Stock prices remain the same
• C)The increase in stock price is less than the speculative premium
• D)All of the above

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Definitions:

Selection Bias

A distortion in the outcome of a study due to non-random selection of participants, leading to an unrepresentative sample.

Double-Masked

A study design in which neither the participants nor the researchers know which participants belong to the control group and which to the experimental group, to prevent bias.

Correlation

A statistical measure that describes the extent to which two variables change together, and the direction (positive or negative) of that relationship.

Magnitude

The size, extent, or importance of something, often quantified in terms of measurements or impact.