[amp_mcq option1=”no option” option2=”put option” option3=”call option” option4=”double option” correct=”option2″]
The correct answer is B. put option.
A put option is a contract that gives the buyer the right, but not the obligation, to sell a specified amount of an underlying asset at a specified price on or before a specified date. The seller of the put option, also known as the option writer, is obligated to buy the asset at the specified price if the buyer exercises the option.
Put options are often used as a way to hedge against a decline in the price of an asset. For example, if you own shares of a stock, you could buy put options on that stock to protect yourself from a decline in its price. If the stock price does decline, you could exercise your put options and sell the stock at the specified price, even if the market price of the stock is lower.
Put options can also be used as a way to speculate on a decline in the price of an asset. If you believe that the price of a stock is going to decline, you could buy put options on that stock in the hope of making a profit. If the stock price does decline, you could sell your put options for a profit.
Here is a brief explanation of each option:
- A. no option is not a valid option.
- B. put option is a contract that gives the buyer the right, but not the obligation, to sell a specified amount of an underlying asset at a specified price on or before a specified date.
- C. call option is a contract that gives the buyer the right, but not the obligation, to buy a specified amount of an underlying asset at a specified price on or before a specified date.
- D. double option is not a valid option.