"I will pay you $100 to not sell your $500,000 house to anyone else for the next month so I can see if I can get the money together to buy it," you say. "Ok," says the home owner. The $100 payment is an option contract.

Question

Quizplus · Accepted Answer

An option contract is a legally binding agreement between two parties giving the buyer the right, but not the obligation, to buy or sell an asset at a predetermined price and time period. In this case, the $100 payment is the consideration for the option to have exclusive rights to purchase the house within a specific timeframe.

"I Will Pay You $100 to Not Sell Your $500,000