Questions
25_2 FIN376 Portfolio Management
Multiple dropdown selections
Complete the following text with the correct words:A call option is a contract through which the Blank 1 Question 10[select: , buyer, seller] acquires the right (but not the obligation) to Blank 2 Question 10[select: , buy, sell] at a predetermined date (called Blank 3 Question 10[select: , maturity date, negotiation date] ), or during a future period of time, an underlying asset, at a predetermined price (called Blank 4 Question 10[select: , exercise price, intrinsic value, time premium] ).A put option is a contract through which the Blank 5 Question 10[select: , buyer, seller] acquires the right (but not the obligation) to Blank 6 Question 10[select: , buy, sell] at a predetermined date (called Blank 7 Question 10[select: , maturity date, negotiation date] ), or during a future period of time, an underlying asset, at a predetermined price (called Blank 8 Question 10[select: , exercise price, intrinsic value, time premium] ).Even if the option's Blank 9 Question 10[select: , buyer, seller] can choose between exercise or not the option, the option's Blank 10 Question 10[select: , buyer, seller] is obliged to accept the option's Blank 11 Question 10[select: , buyer, seller] will.Regardless we are talking about a call option or a put option, at the option's negotiation date, the option's Blank 12 Question 10[select: , buyer, seller] pays to the option's Blank 13 Question 10[select: , buyer, seller] the option's price.
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Step-by-Step Analysis
When working through a fill-in-the-blank about options, it helps to anchor each term to the fundamental roles and features of calls and puts.
Blank 1: The party who gains the right but not the obligation to acquire the underlying asset for a call option is the buyer. Choosing 'buyer' aligns with the standard definition where the call buyer has the right to buy, while the call seller is obligated if the option is exercised.
Blank 2: The action the call option gives the right to perform is to 'buy' the underlying asset. A call gives the holder the right to purchase, not to sell, which ......Login to view full explanationLog in for full answers
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