Question

A trader can close a long position in a call option by: (a) buying a put....

A trader can close a long position in a call option by:

(a) buying a put. (b) selling a call.

(c) buying the stock. (d) buying a call.

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Answer #1

The correct answer is (b) selling a call.

A trader can close a long position in a call option by selling a call.

Initially the trader went long or brought the call option. Now to close his position he needs to sell the call. This is an example of an offsetting trade, where the trader would not wait for the call option to expire on the expiry day. He would rather close his position by entering into a reverse trade i.e. a long position in a call created initially will be closed by selling of a call.

Therefore the trader in order to close his long position in call will need to sell a call.

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