A call option on a stock is a financial instrument defined by which of the following statements?

Question

Quizplus · Accepted Answer

A call option gives the holder the right, but not the obligation, to purchase a stock at a specified price (strike price) at a stated date in the future (expiration date). This means the holder can choose to exercise the option and buy the stock at the strike price, but is not required to do so. Option A and B are incorrect because they describe a put option, which is the opposite of a call option. Option D is also incorrect as it describes a put option.

A Call Option on a Stock Is a Financial Instrument