Which of the following is not a "real option?"
A)the option to enter a new line of business based on a serendipitous discovery
B)the option to expand globally if a product is doing better than expected
C)the option to cease production if a product isn't selling
D)the option to sell your shares of a stock if its price decreases

Question

Quizplus · Accepted Answer

The option to sell your shares of a stock if its price decreases is not a "real option" because it is a basic feature of owning stock and is not a strategic decision made by management in regards to a particular investment. Real options involve strategic decisions about investments and the ability to take advantage of opportunities that arise, while selling a stock due to a price decrease is simply a reactive measure. The option to sell your shares of a stock if its price decreases is not a "real option" in the sense of strategic decision-making. It is a standard action that anyone can take in response to short-term market conditions, without requiring any special managerial insight or strategic planning. Real options refer to more complex decision-making frameworks that involve committing resources to uncertain or long-term projects, such as entering a new line of business or expanding globally. These options require more sophisticated analysis and trade-offs, and involve significant opportunity costs and uncertainties.

Which of the Following Is Not a "Real Option