Call options are purchased with the expectation that the market price of the underlying security will rise while put options are purchased with the expectation that the market price of the underlying security will fall.

Question

Quizplus · Accepted Answer

This statement is true. Call options give the buyer the right to purchase the underlying security at a specified strike price, and the buyer benefits if the market price of the security rises above the strike price. On the other hand, put options give the buyer the right to sell the underlying security at a specified strike price, and the buyer benefits if the market price of the security falls below the strike price. Therefore, call options are bought with bullish expectations while put options are bought with bearish expectations.

Call Options Are Purchased with the Expectation That the Market