Which of the following statements about put and call options is false?
A) They are traded on organized exchanges.
B) They are a form of deferred equity financing by the firm.
C) They can be used to lock in a gain or prevent a loss on a stock holding.
D) They provide the buyer with an opportunity to earn larger returns than simply buying or selling common stock.

Question

Quizplus · Accepted Answer

Put and call options are not a form of deferred equity financing by the firm. They are derivatives that give the holder the right, but not the obligation, to buy (call) or sell (put) a specific underlying asset at a pre-determined price on or before a specific date.

Which of the Following Statements About Put and Call Options