Trader A enters into a forward contract to buy an asset for $1000 in one year. Trader B buys a one-year call option written on the same asset with a strike price of $1000. Assume cost of the option is $100. What is the difference between the positions of the traders?

a.

Trader B always does better.

b.

Trader B does better if ST is above $900.

c.

Trader A does better if ST is above $900.

d.

Trader A does the same as Trader B.

Which of the following statements about long European call options on stocks is NOT correct?

a.

The long call option holder wishes for the underlying stock price S to be less volatile.

b.

The option value can not be higher than S_T.

c.

The option payoff at maturity is max(S_T K, 0).

d.

The option is out-of-the-money when the stock price is higher than the strike: S_T < K