An option that gives the holder the right to buy 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 that gives the holder the right to buy 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 call option gives the holder the right to buy a stock at a specified price (strike price) at some time in the future. This type of option would be beneficial if the stock price rises above the strike price, allowing the holder to purchase the stock at a discount and potentially make a profit. The other options listed (B) put option, (C) out-of-the-money option, (D) naked option, and (E) covered option, all have different specifications and do not fit the description of an option to buy a stock at a specified price.

An Option That Gives the Holder the Right to Buy