Question

There's a call option written for 100 shares of GM stock for $85.00 a share, prior to the third Friday of October 2017: The option writer:

A. has the requirement to sell 100 shares of GM for $85 a share on or before the third Friday of October 2017 if the option holder wants to exercise the option.

B. has the option to sell 100 shares of GM for $85 a share on or before the third Friday of October 2017.

C. can cancel the option before the third Friday of October 2017.

D. does not have to post margin while the option holder does.

Answer 1

Answer: A. has the requirement to sell 100 shares of GM for $85 a share on or before the third Friday of October 2017 if the option holder wants to exercise the option.

Call option means the right to buy a given quantity of an underlying asset at a specific price on or before a specific date. The option writer promises to sell the underlying asset to the call purchaser. The option writer must make the call. So in the given case, the option writer must sell the shares at an specific price on or before expiration date.