Which of the Following Statements Is False

question 26

Multiple Choice

Which of the following statements is false?

• A) Because a short position in an option is the other side of a long position, the profits from a short position in an option are just the negative of the profits of a long position.
• B) The deeper out-of-the-money the put option is, the less negative its beta, and the higher is its expected return.
• C) Although payouts on a long position in an option contract are never negative, the profit from purchasing an option and holding it to expiration could well be negative because the payout at expiration might be less than the initial cost of the option.
• D) The put position has a higher return in states with low stock prices; that is, if the stock has a positive beta, the put has a negative beta.

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Definitions:

Gross Primary Production

The total amount of chemical energy generated by plants through photosynthesis before any energy is used for life processes like respiration.

Respiration

The process by which living organisms take in oxygen and release carbon dioxide, fundamental for energy production.

System Optimization

The process of making a system as effective or functional as possible, often through the use of mathematical methods.

System Simulation

The use of models to recreate and analyze the behavior of complex systems within a virtual environment to predict outcomes under different scenarios.