SIE practice questioneasyOptions — Opening and Closing Transactions
An investor who sells a call option to establish a new short position is executing a(n):
- AClosing sale
- BOpening purchase
- COpening sale✓ Correct answer
- DClosing purchase
Explanation
Why C — Opening sale
An opening sale creates a new short option position — the investor writes (sells) the option to open. An opening purchase creates a long position. A closing sale liquidates an existing long position. A closing purchase buys back an existing short position. The word 'opening' means establishing a NEW position; 'closing' means exiting an existing one.
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