Chapter 11: Understanding Option Fundamentals

Question 1

Option Contract

Answer 1

Provides the holder the right, but not the obligation, to buy or sell an underlying asset at a predetermined price within a specific period. Then, the potential buyer has the right, but not obligation, to purchase the property at a predetermined price within a specific period.

Question 2

Put Option Contract

Answer 2

Provides the investor the privilege to sell the underlying asset at a predetermined strike price