Asked by LYNETTA White on May 02, 2024
Verified
The price that the writer of a put option receives to sell the option is called the
A) premium.
B) exercise price.
C) execution price.
D) acquisition price.
E) strike price.
Put Option
A financial contract allowing the holder to sell a stock, bond, commodity, or other asset at a specified price within a certain period.
Writer
In finance, it refers to the seller of an option contract, who is obligated to buy or sell the underlying asset if the option is exercised.
Premium
The amount by which the price of a security or insurance policy exceeds its par or face value or the cost of acquiring an option or futures contract.
- Recognize and provide definitions for the jargon pertinent to options, highlighting strike price, premium, and the differentiation between being in the money and out of the money.
Verified Answer
MM
Marissa MorfordMay 07, 2024
Final Answer :
A
Explanation :
The price received by the writer (seller) of a put option (or any option) for selling the option is known as the premium. This is the income the seller earns for taking on the obligation to buy (in the case of a put) or sell (in the case of a call) the underlying asset if the option is exercised by the buyer.
Learning Objectives
- Recognize and provide definitions for the jargon pertinent to options, highlighting strike price, premium, and the differentiation between being in the money and out of the money.