Options are contracts that give the purchasers the ________.
A) option to buy or sell an underlying asset
B) the obligation to buy or sell an underlying asset
C) the right to hold an underlying asset
D) the right to switch payment streams

Question

Quizplus · Accepted Answer

Options provide the right, but not the obligation, to buy or sell an underlying asset at a predetermined price and time. This is different from futures and forward contracts, which require the purchaser to buy or sell the underlying asset at a specific price and time. Options allow for flexibility and risk management in investing.

Options Are Contracts That Give the Purchasers the ________