Question

19. What is a call option? A. Right to sell stock at a pre-determined price B. Right to buy stock at a post-determined price C. Right to sell stock at a post-determined price D. Right to buy stock at a pre-determined price 20. When is a call option exercised for maximum gain? A. Buyers exercise when the option is in the money B. Buyers exercise when the option is out of the money C. Sellers exercise when the option is in the money D. Sellers exercise when the option is out of the money 21. What is a put option? A. Right to sell stock at a pre-determined price B. Right to buy stock at a post-determined price C. Right to sell stock at a post-determined price D. Right to buy stock at a pre-determined price 22. When is a put option exercised for maximum gain by the buyer? A. When the stock price stays the same B. When the stock price falls much below the exercise price C. When the stock price increases D. When the stock price is volatile

Answer 1

19. Option A is false because call option helps to buy a stock at predetermined price
Option B is False because strike price is predetermined.
Option C is False as stocks are bought at predetermined price.
Option d is correct option

20. Option A is correct option.
Option B is incorrect because when an option is out of money it means strike price is less than stock price.
Option C is incorrect because seller of call option doesnot profit from price fluctuations.
Option D is incorrect because only buyers can exercise their right to buy shares.

21. Option A is correct option.
Option B is false because the strike price is predetermined,
Option c is false because price is predetermined.
Option D is false because put option doesnot give right to buy a stock but instead it gives right to sell a stock

22. Option A is false. When Stock price and strike price are same there is 0 profit.
Option B is true.
Option C is False when stock price rises it causes loss .
Option d is true when stock price is volatile put option price increases thereby reducing the profit