Which of the following characterisation of a Call option is TRUE: A It is the right to buy an asset

Finance Dec 10, 2020

Which of the following characterisation of a Call option is TRUE: A It is the right to buy an asset. B It is the obligation to sell an asset. C It is the obligation to buy an asset. D It is the right It is the right to sell an asset. E None of the above.

Expert Solution

A call option is a financial contract which will give the option to the buyer, the right and not the obligation to buy the asset, at a specified price within a specific time period.

A call buyer will profit when the underlying asset increases in value

Going with the above option, the correct answer to the question is

Option A: the right to buy an asset

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