The buyer of a bond call option
A)receives a premium in return for standing ready to sell the bond at the exercise price.
B)receives a premium in return for standing ready to buy bonds at the exercise price.
C)pays a premium and has the right to sell the underlying bond at the agreed exercise price.
D)pays a premium and has the right to buy the underlying bond at the agreed exercise price.

Question

Quizplus · Accepted Answer

The buyer of a bond call option pays a premium and has the right to buy the underlying bond at the agreed exercise price. The key word to focus on here is "call", which means the buyer has the right to exercise the option and purchase the bond. Therefore, options contracts give the right to buy or sell, and in this case, the buyer has the right to buy the bond at the exercise price.

The Buyer of a Bond Call Option