Which one of the following statements concerning options is correct?
A) One option covers 1,000 shares of stock.
B) A put gives the option holder the right to buy a stated amount of securities.
C) The owner of a call is entitled to the dividends paid on the underlying shares of stock.
D) Option holders can profit on movements of the price of the underlying security.

Question

Quizplus · Accepted Answer

Option holders can profit from movements in the price of the underlying security, whether through buying (calls) or selling (puts) the security at a predetermined price. Options typically cover 100 shares, not 1,000 (A is incorrect). A put option gives the holder the right to sell, not buy, a stated amount of securities (B is incorrect). The owner of a call option does not receive dividends from the underlying stock; dividends are paid to the actual shareholders (C is incorrect).

Which One of the Following Statements Concerning Options Is Correct