Question

Which of the following statements is not correct?

Group of answer choices

Being short a call requires the obligation to sell a stock at a certain price.

Buying a put gives you the right to sell a stock at a certain price.

Options can never be worth less than zero.

Selling a put gives you the right to buy a stock at a certain price.

Being long a call gives you the right to buy a stock at the exercise price.

Answer 1

The following statement are not correct:

• Being short a call requires the obligation to sell a stock at a certain price. (The reason the statement is not correct is that short call is a right but not an obligation to sell a stock.)
• Selling a put gives you the right to buy a stock at a certain price. (This statement is not correct as when you sell a put option you are obliged to buy a stock when the put option is executed. It is not only the right but an obligation for the writer of the contract to buy a stock.)