Share
Explore BrainMass

Call options discussion

The book we are using does not explain short and long positions at all. Could someone explain what these mean and how to answer this question?

Which one of the following statements about the value of a call option at expiration is false?
a. A short position in a call option will result in a loss if the stock price exceeds the exercise price.
b. The value of a long position equals zero or the stock price minus the exercise price, whichever is higher.
c. The value of a long position equals zero or the exercise price minus the stock price, whichever is higher.
d. A short position in a call option has a zero value for all stock prices equal to or less than the exercise price.

Solution Preview

The book we are using does not explain short and long positions at all. Could someone explain what these mean and how to answer this question?

Which one of the following statements about the value of a call option at expiration is false?
a. A short position in a call option will result in a loss if the stock price exceeds the exercise price.
A short position is the sale of a security or financial position not owned. The exercise price is the price at which the option holder has the right to sell/purchase the underlying stock. The ...

Solution Summary

Call options iae discussed very comprehensively in this explanation..

$2.19