The Payoffs from Investing in an Option Contract Are Designed

question 97

Multiple Choice

The payoffs from investing in an option contract are designed so that:

• A) both the buyer and the seller of the contract will profit.
• B) the seller's (buyer's) gain is the buyer's (seller's) loss.
• C) roughly 20% of sellers and 50% of buyers profit.
• D) there are no profits but there are also no losses.

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Definitions:

Shareholders

Individuals or entities that own shares in a company, giving them ownership stakes and possibly the right to vote on corporate matters.

Security Agreement

A contract that grants a lender a security interest in specified assets of the borrower, serving as collateral for a loan.

Vicariously Liable

A legal principle where one party is held responsible for the actions or omissions of another party, typically in employment relationships.

Secured Creditor

A lender or creditor that has the right to claim specific assets of the borrower if the debtor fails to pay back the owed money.