The right to buy a given quantity of an underlying asset at a predetermined price on or before a specific date is called a(n):
A)Put option.
B)Option writer.
C)Call option.
D)Arbitrage contract.

Question

Quizplus · Accepted Answer

The given definition describes a call option, which gives the holder the right (but not the obligation) to purchase the underlying asset at a predetermined price (strike price) on or before a specific date (expiration date). A put option, on the other hand, gives the holder the right to sell the underlying asset at a predetermined price. Option writer is the person or entity that sells the option contract to the holder. Arbitrage contract refers to a contract that allows a risk-free profit through exploiting price discrepancies in different markets.

The Right to Buy a Given Quantity of an Underlying