Question

1. If someone writes a call, they usually want the underlying asset to

   	A.	go up
   	B.	go down
   	C.	fluctuate
   	D.	do the hustle

Answer 1

A call option gives the option buyer an opportunity to make profits if the price of the underlying asset moves up and exceeds the strike price of the option. However, there is no obligation for the buyer to exercise the option until and unless the price goes up. If the stock price goes down, then the buyer won't exercise the option and the call will lapse. Thus, call option is basically upside betting along with downward protection.

The call writer (seller), on the other hand, has the obligation to sell the stock in case the stock price exceeds the strike price and the buyer wishes to purchase the stock. Hence he loses money if the stock goes up, so he will want the price of the underlying asset to go down and be less than the strike price so that the option lapses.

ans B) go down