Which of the following statements is incorrect?
A) A call option writer has a short position in the call.
B) The longer the time to expiration, the greater the option's time value.
C) A company issues call options on their stock, just like they issue the underlying stock.
D) The market value of an option is calculated as option premium = intrinsic value + time value.
E) The call option writer makes money from the premium the call option buyer pays to buy the option.

Question

Quizplus · Accepted Answer

Companies do not issue call options on their stock. Call options, like other options, are financial derivatives created by investors or their brokers, not by the companies whose stock they represent.

Which of the Following Statements Is Incorrect