Using the BOPM, if a call is overpriced, an investor would
A) buy a call.
B) not participate in the market.
C) buy a call and buy a bond.
D) write a call.

Question

Quizplus · Accepted Answer

If a call option is overpriced based on the BOPM, the investor can profit from this by writing, or selling, the call option. By doing so, they can receive the premium paid by the buyer of the option and make a profit if the option expires out of the money. Therefore, the best choice in this situation would be to write a call option.

Using the BOPM, If a Call Is Overpriced, an Investor