That argument assumes that one of the options (A through E) must be true, and there is nothing in the framing of the question that justifies that assumption. The question is: “What can we conclude,” and we are given five options, but we are not told that we have to choose one of them. Indeed, to conclude it would require us to eliminate all other possibilities, and there are possibilities outside of the options given.
He could have half of a hat that is blue, but that is not included among the options. He could have a green baseball glove that he calls a hat because he is lying about what is and is not even a hat.
