The payoffs from investing in options are designed so that:
A) both buyers and sellers can profit.
B) the seller's (buyer's) gain is the buyer's (seller's) loss.
C) roughly 20% of sellers and 50% of buyers profit.
D) few buyers or sellers profit; they buy "insurance."

Question

Quizplus · Accepted Answer

The payoffs from investing in options are designed so that when one party gains, the other party loses. This is because options contracts give buyers the right, but not the obligation, to buy or sell an underlying asset at a set price within a certain time frame. Sellers, on the other hand, are obligated to buy or sell the asset if the buyer chooses to exercise the option. Therefore, the seller's gain is the buyer's loss, and vice versa.

The Payoffs from Investing in Options Are Designed So That