Options do not eliminate the risks but they give people choices about which risks they will hold and help to price those risks they might wish to assign to others.

Question

Quizplus · Accepted Answer

Options provide the holder with a choice to either exercise the option and take on the associated risk or let it expire. However, options do not completely eliminate risk, but rather provide a means for managing and transferring it through the marketplace. The pricing of options reflects the expected level of risk and the likelihood of it occurring.

Options Do Not Eliminate the Risks but They Give People