The purchaser of an option must pay the writer a
A)strike price.
B)market price.
C)margin.
D)premium.

Question

Quizplus · Accepted Answer

The purchaser of an option must pay the writer a premium, which is the price paid for the option. The premium gives the purchaser the right, but not the obligation, to buy or sell an underlying asset at a specific price within a specific time frame. The other options listed (strike price, market price, and margin) are all terms used in options trading, but they do not refer specifically to the payment made by the purchaser to the writer.

The Purchaser of an Option Must Pay the Writer a