SOFA-CFE · Question #114
An option to buy a particular stock at a fixed price within a stated period of time is known as:
The correct answer is B. call. A call option gives the holder the right (but not the obligation) to buy a specific stock at a predetermined "strike" price before the option expires - matching the definition exactly. A put (A) is the opposite: it grants the right to sell a stock at a fixed price, making it…
Question
An option to buy a particular stock at a fixed price within a stated period of time is known as:
Options
- Aput
- Bcall
- Chedge
- DCapital gain
How the community answered
(44 responses)- A5% (2)
- B82% (36)
- C11% (5)
- D2% (1)
Explanation
A call option gives the holder the right (but not the obligation) to buy a specific stock at a predetermined "strike" price before the option expires - matching the definition exactly. A put (A) is the opposite: it grants the right to sell a stock at a fixed price, making it easy to confuse the two. A hedge (C) is a broad risk-management strategy, not a specific contract type, and can involve many instruments beyond options. A capital gain (D) is simply the profit earned when an asset is sold for more than its purchase price - it's an outcome, not a contract.
Memory tip: Think Call = Calling the stock to you (you're buying it); Put = Pushing the stock away (you're selling it).
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