What type of financial instrument is depicted in the position diagram shown below?

A) Forward sale
B) Forward purchase
C) Call option
D) Put option

Question

What type of financial instrument is depicted in the position diagram shown below?

A) Forward sale 
B) Forward purchase 
C) Call option 
D) Put option

Quizplus · Accepted Answer

The position diagram shows a right to buy a security at a fixed price, which is characteristic of a call option. A forward sale and a forward purchase involve an agreement to buy/sell a security at a future date, but the fixed price is agreed upon at the time of the contract, and not based on the underlying asset's price at maturity. A put option would show a right to sell the security at a fixed price, which is not depicted in the diagram.

What Type of Financial Instrument Is Depicted in the Position