The options market allows investors to speculate on the price movement of the un
ID: 2790525 • Letter: T
Question
The options market allows investors to speculate on the price movement of the underlying security. If the investor thought a security was going to go up in the future they would which of the following?
Buy a put option on the underlying security
Write a call option on the underlying security and pocket the profit
Sell a put option on the underlying security and pocket the profit
Buy a call option on the underlying security
Buy a put option on the underlying security
Write a call option on the underlying security and pocket the profit
Sell a put option on the underlying security and pocket the profit
Buy a call option on the underlying security
Explanation / Answer
In call option investor earn profit when stock price is higher than strike price. if it is expected that stock price will rise in future then investor should Buy a call option on the underlying security. When stock price rise the difference between stock price and excercise price would be his payoff and difference between payoff and premoum paid on call option would be his profit.
Option (D) is correct answer.