- CFA Exams
- CFA Level I Exam
- Topic 7. Derivatives
- Learning Module 8. Pricing and Valuation of Options
- Subject 1. Option Exercise Value, Moneyness, and Time Value
CFA Practice Question
Which of the following statements about options and their underlying assets is FALSE?
B. The owner of the option is legally required to engage in a transaction involving the asset.
C. The holder of a long position on an option is the only party with the right to initiate a transaction involving the asset.
A. The value of an option, in comparison to its underlying asset, has the potential of creating an arbitrage opportunity.
B. The owner of the option is legally required to engage in a transaction involving the asset.
C. The holder of a long position on an option is the only party with the right to initiate a transaction involving the asset.
Correct Answer: B
The option writer is required to honor the terms of the contract if called upon by the buyer to do so. The option buyer has the discretion to exercise the contract or not.
User Contributed Comments 2
| User | Comment |
|---|---|
| Shaan23 | Thought A was false too but guess not. |
| schweitzdm | As did I. |