What is an option?
A)A contract that gives the holder the right to sell an instrument at a pre-specified price.
B)A contract that is derived from some other underlying quantity,index,asset or event.
C)A contract that gives the holder the right to acquire an instrument at a pre-specified price.
D)A contract that gives the holder the right to buy or sell something at a specified price.

Question

Quizplus · Accepted Answer

An option is a contract that gives the holder the right to buy or sell something at a specified price. Choices A and C are specific types of options, while choice B is a broad definition of a derivative contract which may include options. However, the most accurate and concise definition of an option is provided by choice D.

What Is an Option