Which of the following statements is correct?
A) The writer (seller) of a call option on shares receives a fee from the buyer of the option
B) The writer (seller) of a call option on shares may or may not have to sell the shares to the buyer of the option
C) The writer (seller) of a call option on shares has an obligation to sell the shares at a future time to the buyer of the option
D) All of the above are correct

Question

Quizplus · Accepted Answer

All the statements are correct. The writer of a call option receives a premium (fee) from the buyer for taking on the obligation to sell shares at a specified price if the buyer exercises the option. The writer may or may not have to sell the shares, depending on whether the option is exercised. If the option is exercised, the writer is obligated to sell the shares at the agreed price.

Which of the Following Statements Is Correct