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.

Question

Quizplus · Accepted Answer

The payoffs from investing in an option contract are designed in such a way that the seller's gain is the buyer's loss. This is because options are a zero-sum game where the gains of one party are offset by the losses of the other party. While some buyers and sellers may profit, it is not a guarantee and the proportions in option trading vary widely depending on various factors such as market conditions and the strategies employed. Option trading involves risks and should be carefully considered.

The Payoffs from Investing in an Option Contract Are Designed