Which of the following best describes an option contract in principle?
A)An option is a contract that gives its holder the obligation to buy or sell an asset at a predetermined price within a specified period of time.
B)An option is a contract that gives its seller the right to buy or sell an asset at a predetermined price within a specified period of time.
C)An option is a contract that gives its holder the right to buy or sell an asset at a predetermined price within a specified period of time.
D)An option is a contract that gives its writer the right to buy or sell an asset at a predetermined price within a specified period of time.

Question

Quizplus · Accepted Answer

An option contract gives the holder (buyer) the right, but not the obligation, to buy or sell an asset at a predetermined price within a specified period of time. This means the buyer can choose whether or not to exercise the option. Option sellers (writers) are obligated to fulfill the terms of the contract if the buyer decides to exercise their option.

Which of the Following Best Describes an Option Contract in Principle