A fundamental definition of option is "the right, but not the ________, to buy (call option) or sell (put option) an investment holding at a predetermined price (called the exercise price or strike price) at some particular date in the future." [Latimore, D. (2002) p. 2]
A) access
B) authority
C) obligation
D) strategy

Question

Quizplus · Accepted Answer

An option provides the right, but not the obligation, to buy or sell an investment holding at a predetermined price at a future date. The option holder has the choice to exercise or not to exercise the option, depending on market conditions and personal investment goals. Therefore, option holders are not obligated to buy or sell the underlying asset, hence option contracts provide flexibility to investors.

A Fundamental Definition of Option Is "The Right, but Not