An agreement that grants its owner the right, but not the obligation, to buy or sell a specific asset at a specific price for a set period of time is called a(n) ________ contract.
A) option
B) forward
C) futures
D) swap
E) spot

Question

Quizplus · Accepted Answer

An option contract grants the owner the right, but not the obligation, to buy or sell a specific asset at a specific price for a set period of time. This differs from a forward contract, which is a binding agreement to buy or sell an asset at a specific price on a specific date, and from a futures contract, which is similar to a forward contract but is traded on an exchange with standardized terms. Swaps and spots are also types of financial contracts, but they do not grant the optionality that is characteristic of an option contract.

An Agreement That Grants Its Owner the Right, but Not