Which one of the following actions will provide you with the right, but not the obligation, to sell the underlying asset at a specified price during a specified period of time?
A) Purchase of a call option
B) Sale of a call option
C) Purchase of a put option
D) Sale of a put option
E) Swap

Question

Quizplus · Accepted Answer

Purchasing a put option gives the right, but not the obligation, to sell the underlying asset at a specified price (strike price) during a specified period of time. This allows the holder of the put option to profit if the market price of the underlying asset decreases, as they can sell it for a higher price than the market value. Options give the holder the right, but not the obligation, to buy or sell the underlying asset, while swaps are essentially agreements between two parties to exchange cash flows or assets in the future. Therefore, options are a more suitable choice for this scenario than swaps. Selling options, on the other hand, gives the seller the obligation to either buy or sell the underlying asset and is not the correct choice in this case.

Which One of the Following Actions Will Provide You with the Right