You sold (wrote) 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 are obligated to sell Netscape shares for $165 at any time prior to the option expiration in May, if the owner of the option chooses to exercise.

Question

Quizplus · Accepted Answer

When you write (sell) a call option, you are obligated to sell the underlying asset at the strike price if the option buyer decides to exercise their right to buy the asset at that price before the option expires.

You Sold (Wrote) a May American Call Option on Netscape