Series 7 practice questioneasyOptions — Call Options Basics
A call option gives the holder the right to do which of the following?
- ABuy the underlying stock at the strike price before expiration✓ Correct answer
- BSell the underlying stock at the strike price before expiration
- CBuy the underlying stock at the current market price
- DSell the underlying stock at the current market price
Explanation
Why A — Buy the underlying stock at the strike price before expiration
A call option grants the holder (buyer) the right, but not the obligation, to purchase the underlying security at the strike price on or before the expiration date. The seller (writer) of the call is obligated to sell the stock if the option is exercised.
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