A call option contract:
A) obligates both the buyer and the seller.
B) obligates the buyer but not the seller.
C) grants rights to the buyer and obligates the seller.
D) grants rights to the seller and obligates the buyer.
E) grants rights to both the buyer and the seller but does not obligate either party.

Question

Quizplus · Accepted Answer

A call option contract grants the buyer the right, but not the obligation, to purchase an underlying asset at a predetermined price (strike price) within a specified time frame (expiration date). The seller of the call option is obligated to sell the underlying asset to the buyer at the strike price if the buyer decides to exercise their right to purchase. Therefore, a call option contract grants rights to the buyer and obligates the seller to sell the underlying asset at the agreed-upon strike price if the buyer decides to exercise their option.

A Call Option Contract