Which of the following statements is CORRECT?
A) Put options give investors the right to buy a stock at a certain exercise price before a specified date.
B) Call options give investors the right to sell a stock at a certain exercise price before a specified date.
C) Options typically sell for less than their exercise value.
D) LEAPS are very short-term options that have begun trading on the exchanges in recent years.
E) Option holders are not entitled to receive dividends unless they choose to exercise their option.

Question

Quizplus · Accepted Answer

Option holders do not have the rights to dividends that the stock pays until they exercise their option and become the holder of the stock. Options are contracts that give the right, but not the obligation, to buy or sell an underlying asset at a set price before a certain date. The other statements are incorrect because: A) Put options give the right to sell, not buy. B) Call options give the right to buy, not sell. C) Options can sell for more or less than their intrinsic value, depending on various factors including time value. D) LEAPS are long-term options, not very short-term.

Which of the Following Statements Is CORRECT