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 because leverage is not as great as with a call.
E) All of these are correct.

Question

Quizplus · Accepted Answer

A call option gives the investor the right to purchase a given number of shares of a specified stock at a set price, while a put option gives the investor the right to sell a given number of shares of a stock at a set price. Option A is incorrect as it confuses the terms "call" and "put." Option B is also incorrect as it implies that neither option involves actual stock ownership, which is not true. Option D is incorrect as it suggests that a put option is riskier than a call option, which is not necessarily the case.

A Call Option Differs from a Put Option in That