Josh opted to exercise his January option at the end of December and paid $3,250 at that time to acquire 100 shares of stock.Which one of the following did Josh own?

Question

Quizplus · Accepted Answer

Josh owned an American call option, which allowed him to buy (or "call away") the stock at a predetermined price before or at the option's expiration date. Since he exercised his option before the expiration date (in January), and he paid to acquire shares, it indicates he had a call option, not a put option (which is for selling shares). European options can only be exercised at expiration, not before, so this rules out choices C, D, and E.

Josh Opted to Exercise His January Option at the End