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.
• 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.
  No. To distinguish on the basis of ownership is a matter of covered and uncovered short calls, not a matter of long and short positions.
  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.

(Click here for help)