Derivatives【Reading 63】Sample following, statements, concerning, 2012

burning0spear

Regarding buyers and sellers of put and call options, which of the following statements concerning the resulting option position is most accurate? The buyer of a:

A) call option is taking a long position and the buyer of a put option is taking a short position.

B) put option is taking a short position and the seller of a call option is taking a short position.

C) call option is taking a long position while the seller of a put is taking a short position.

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The buyers of both puts and calls are taking long positions in the options contracts (but the buyer of a put is establishing a potentially short exposure to the underlying), while writers (sellers) of each are taking short positions in the options contracts.

burning0spear

Which of the following statements about put and call options at expiration is least accurate?

Put

Call

A) The maximum gain to the buyer is unlimited. The maximum loss to the writer is the premium.

B) The maximum loss to a writer is their cost on the stock less the premium The maximum gain to the buyer is unlimited.

C) The maximum gain to the buyer is limited to the stock price less the premium price. The maximum gain to the buyer is unlimited.

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The maximum gain to the buyer of a put is limited to the value of the stock less the premium.
The maximum loss to the writer of a call is unlimited.