You Have Sold a Call Option on Ausia Co

question 71

Multiple Choice

You have sold a call option on Ausia Co. stock with a strike price of $50. You do not intend to make any other transactions before the options expiration date. The current stock price is $30. Which of the following statements best describes your hopes for the stock?

• A) You want the stock price to fall below $30.
• B) You want the stock price to rise above $50.
• C) You are indifferent, as long as the stock price stays under $50.
• D) It doesn't matter; you are indifferent to changes in the stock price.

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Definitions:

Default Rates

The percentage of borrowers who fail to make required payments on their loans within a specified period.

Secondary Mortgage Market

The market where home loans and servicing rights are bought and sold between lenders and investors.

Financial Institution

An establishment that conducts financial transactions such as investments, loans, and deposits.