The seller of an option has the
A)right to buy or sell the underlying asset.
B)obligation to buy or sell the underlying asset.
C)ability to reduce transaction risk.
D)right to exchange one payment stream for another.

Question

Quizplus · Accepted Answer

The seller of an option, also known as the option writer, has the obligation to buy or sell the underlying asset at the specified price and time if the option buyer decides to exercise their option. This obligation is also known as a liability, and the writer can be exposed to potentially unlimited losses if the market moves against them. Therefore, option writing requires careful risk management and is not suitable for all investors.

The Seller of an Option Has the