An option which gives the holder the right to sell a stock at a specified price at some time in the future is called a(n)
A) Call option.
B) Put option.
C) Out-of-the-money option.
D) Naked option.
E) Covered option.

Question

An option which gives the holder the right to sell a stock at a specified price at some time in the future is called a(n)
A) Call option.
B) Put option.
C) Out-of-the-money option.
D) Naked option.
E) Covered option.

Quizplus · Accepted Answer

A put option gives the holder the right to sell a stock at a specified price, known as the strike price, at some time in the future. This is in contrast to a call option, which gives the holder the right to buy a stock at a specified price in the future. Out-of-the-money options have a strike price that is not advantageous for the holder to exercise, while a naked option is an option that is not covered by an offsetting position. A covered option is an option position that is offset by an equal and opposite position in the underlying security, so it is not relevant to this question.

An Option Which Gives the Holder the Right to Sell