Question

Which of the following has the obligation to purchase stock at the strike price when an option is exercised?

		c. put holder
		d. put writer
		b. call writer
		e. call writer and put holder
		a. call holder

Which of the following has the obligation to sell a stock at the strike price when an option is exercised?

		a. call holder
		e. call holder and put writer
		b. call writer
		c. put holder
		d. put writer

Answer 1

Answer 1)

Put Writer has the obligation to purchase stock at the strike price when an option is exercised. Put Writer is obligated to buy the shares if exercised by the Put holder. Put Holder exercise the Option when the Stock Price falls below the Strike Price.

Option D is correct. Put Writer.

Answer 2)

Call Writer has the obligation to sell stock at the strike price when an option is exercised. Call Writer is obligated to sell the shares if exercised by the Call holder. Call Holder exercise the Option when the Stock Price rises above the Strike Price.

Option B is correct. Call Writer.