The Buyer of an Option Contract

question 66

Multiple Choice

The buyer of an option contract:

• A) receives the option premium in exchange for an obligation to either buy or sell an underlying asset.
• B) pays an option premium in exchange for a right to buy or sell an underlying asset during a specified period of time.
• C) pays the strike price at the time the option is purchased and in exchange receives the right to exercise the option at any time during the option period.
• D) receives the option premium in exchange for guaranteeing the purchase or sale of an underlying asset if called upon to do so.
• E) pays the option premium in exchange for receiving the strike price at a later date.

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Definitions:

Depreciates

The loss of value of an asset over time due to factors such as wear and tear, age, or technological advancements.

Russian Ruble

The national currency of Russia, utilized as the medium of exchange within the country.

Appreciate

To increase in value or price over a period of time.

Freely Flexible Exchange Rates

A currency system where the value of a currency is allowed to fluctuate according to the foreign exchange market without direct government intervention.