Question9 Selling an option giving the right but not the obligation to sell a currency at a fixed rate is a: Select one alternative: A) Long Call option B) Long Put option C) Short Call option D) Short Put option ResetMaximum marks: 1 Flag question undefined

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BlackTom AI · Accepted Answer

Let’s break down what each option represents in option terminology, focusing on the underlying right and the obligations involved.
Option A: Long Call option. A long call gives the holder the right, not the obligation, to buy the currency at a fixed strike price. It does not involve selling the currency; therefore, this choice does not match the description of selling an option that grants the right to sell. This option is incorrect because it centers on buying rather than selling.
Option B: Long Put option. A long put grants the holder the right to sell the currency at the strike price, which is the opposite side of the transaction compared to selling an option. While a put concerns selling, the phrase in the question refers to selling the option itself, i.e., being the writer/seller of the put. Hence, this option is incorrect because it describes the buyer's right, not the act of selling the option.
Option C: Short Call option. A short call obligates the seller to deliver the underlying asset if the buyer exercises the option. While it involves selling the asset under exercise, the key phrase in the question is about selling an option that grants the right to sell at a fixed rate, which aligns with a put, not with a call. So this option is incorrect due to mismatch in the right/obligation structure and the asset direction.
Option D: Short Put option. A short put means you sold (wrote) a put option. The holder of a put has the right to sell the currency at the fixed rate, while the option writer (you) has the obligation to buy the currency if the option is exercised. This exactly matches the description: selling an option that gives the right to sell a currency at a fixed rate, i.e., a short put. Therefore, this option correctly describes the scenario.

Question9 Selling an option giving the right but not the obligation to sell a currency at a fixed rate is a: Select one alternative: A) Long Call option B) Long Put option C) Short Call option D) Short Put option ResetMaximum marks: 1 Flag question undefined

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Question9 Selling an option giving the right but not the obligation to sell a currency at a fixed rate is a: Select one alternative: A) Long Call option B) Long Put option C) Short Call option D) Short Put option ResetMaximum marks: 1 Flag question undefined

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The right, but not the obligation, to buy shares of stock or a specific commodity for a set price within a set time period is called

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A foreign currency option gives the holder the right to a foreign currency, whereas a foreign currency option gives the holder the right to an option.