Question

Which one of the following statements about the value of a call option at expiration isfalse?

a. A short position in a call option will result in a loss if the stock price exceeds the exercise price.

b. The value of a long position equals zero or the stock price minus the exercise price,whichever is higher.

c. The value of a long position equals zero or the exercise price minus the stock price,whichever is higher.

d. A short position in a call option has a zero value for all stock prices equal to or lessthan the exercise price.

Short answer

Option ‘c’

Step-by-step solution

Definition of call option

A contract between buyer and seller to exchange a security at a specified price is called call option.

Explanation on value of call option at expiration

From all the given statements, the statement ‘c’ is the description of pay off to a put and not call. Hence option ‘c’ is false.

Incorret options: all the other options a, b and d are correct as tey ae about the value of the call option at the expiration.