You purchased a May American call option on Netscape stock with an exercise price of $165. Which of the following statements is true?
A) You have the right to buy Netscape shares for $165 at any time prior to the option expiration in May, regardless of the stock's market price.
B) You are obligated to buy Netscape shares for $165 when the option expires in May, regardless of the stock's market price.
C) You have the right to sell Netscape shares for $165 at any time prior to the option expiration in May, regardless of the stock's market price.
D) You are obligated to sell Netscape shares for $165 when the option expires in May, regardless of the stock's market price.
E) You have the right to buy Netscape shares for $165 at any time prior to the option expiration in May, but only if the stock price is less than $165.

Question

Quizplus · Accepted Answer

A call option gives the holder the right, but not the obligation, to buy the underlying asset at the strike price (in this case, $165) at any time before the option expires.

You Purchased a May American Call Option on Netscape Stock