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 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. Therefore, a call and a put option have different obligations and rights for the investor. Option B is incorrect because both options involve the risk of actual stock ownership. Option D is also incorrect because the risk of the options depends on various factors, such as the strike price, expiration date, and volatility of the stock, and not on the leverage.

A Call Option Differs from a Put Option in That