Consider an option that gives the owner the right to buy the underlying stock for $20 only on the third Friday of May, next year. This option can best be described as:

Question

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This option gives the owner the right to buy the underlying stock at a specific price ($20) but only on a specific date (third Friday of May next year). Since the option can only be exercised on a specific date, it is a European option. Since the option gives the owner the right to buy (call) the underlying stock, it is a call option. Therefore, the best choice is D) a European call option.

Consider an Option That Gives the Owner the Right to Buy