Asked by Ja'Nayla Watts on May 10, 2024
Verified
The price that the writer of a call option receives to sell the option is called the
A) strike price.
B) exercise price.
C) execution price.
D) acquisition price.
E) premium.
Call Option
A financial contract that gives the holder the right, but not the obligation, to buy a specified amount of an underlying asset at a set price within a specified period.
Writer
In the context of options, the writer is the seller who grants the right to the buyer in exchange for a premium, assuming the risk that the asset may have to be delivered under the contract terms.
Premium
The amount by which the price of something, such as a security or insurance policy, exceeds its face value or principal.
- Determine and explain the vocabulary associated with options, including but not limited to strike price, premium, and in the money/out of the money distinctions.
Verified Answer
KS
Kristin StoneMay 14, 2024
Final Answer :
E
Explanation :
The price received by the writer (seller) of a call option for selling the option is known as the premium. This is the income the seller earns for taking on the obligation to sell the underlying asset at the strike price if the option is exercised by the buyer.
Learning Objectives
- Determine and explain the vocabulary associated with options, including but not limited to strike price, premium, and in the money/out of the money distinctions.