Chapter 02 · Section 2.1

Short vs. Long Calls

Which of the following is true?

a) A long call gives its holder the right to enter a long position in the underlying asset, whereas a short call gives him the right to enter a short position in the underlying asset.
No. A long call gives its holder the right to choose whether to buy the underlying asset at the specified price. A short call requires the write to sell at a specified price should he be asked to fulfill that obligation.
b) A long call is a call written by somebody who owns the necessary quantity of the underlying asset, whereas a short call is written by somebody who does not own the underlying asset.
c) A long call is a call written by somebody who owns the necessary quantity of the underlying asset, whereas a short call is written by somebody who does not own the underlying asset.