Option Writing Can Be Very Profitable Because the Majority of Options

question 61

True/False

Option writing can be very profitable because the majority of options are never exercised.

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Definitions:

Free-Rider Problem

A situation in which individuals consume more than their fair share of a public resource, or shoulder less than a fair share of the costs of its production, without contributing to its provision.

Coase Theorem

Under certain conditions, when externalities are present, private parties can arrive at the efficient solution without government involvement.

External Cost

External cost is a cost incurred by a third party who did not agree to the action that caused the cost, often seen in pollution or other forms of environmental impact.

MC

An abbreviation commonly used for "Marginal Cost," which refers to the additional cost incurred by producing one more unit of a good or service.