Which statement is true regarding a foreign currency option?
A) A foreign currency option gives the holder the obligation to buy or sell foreign currency in the future.
B) A foreign currency option gives the holder the obligation only sell foreign currency in the future.
C) A foreign currency option gives the holder the obligation to only buy foreign currency in the future.
D) A foreign currency option gives the holder the right but not the obligation to buy or sell foreign currency in the future.
E) A foreign currency option gives the holder the obligation to buy or sell foreign currency in the future at the spot rate on the future date.

Question

Quizplus · Accepted Answer

A foreign currency option gives the holder the right, but not the obligation, to buy or sell foreign currency in the future. The holder can choose to exercise or not exercise the option depending on the market conditions at the time of expiration.

Which Statement Is True Regarding a Foreign Currency Option