A call option differs from a put option in that
A) a call option obliges the investor to purchase a given number of shares in a specific common stock at a set price; a put obliges the investor to sell a certain number of shares in a common stock at a set price.
B) both give the investor the opportunity to participate in stock market dealings without the risk of actual stock ownership.
C) a call option gives the investor the right to purchase a given number of shares of a specified stock at a set price; a put option gives the investor the right to sell a given number of shares of a stock at a set price.
D) a put option has risk, since leverage is not as great as with a call.
E) none of the above

Question

Quizplus · Accepted Answer

A call option gives the holder the right, but not the obligation, to buy a given number of shares of a specified stock at a set price (known as the strike price) within a specified time frame. A put option gives the holder the right, but not the obligation, to sell a given number of shares of a specified stock at a set price within a specified time frame. Therefore, option C is the correct answer. Option A is incorrect because it describes a put option, not a call option. Option B is incorrect because it is not true that options are entirely without risk. Option D is incorrect because it is not true that put options have less leverage than call options.

A Call Option Differs from a Put Option in That