Series VIIIEasyOptions Contracts

The buyer of a call option acquires:

AThe obligation to buy the underlying at the market price
BThe obligation to sell the underlying at the strike price
CThe right, but not the obligation, to buy the underlying at the strike pricecheck_circle
DThe right to receive the futures price at expiry

Correct answer

C. The right, but not the obligation, to buy the underlying at the strike price

lightbulbDetailed Solution

A call buyer pays a premium for the right — not the obligation — to buy the underlying at the strike price up to (or on) expiry. The buyer exercises only when it is profitable (spot above strike); otherwise the option lapses and the loss is limited to the premium paid.

Reference: NISM Series VIII Equity Derivatives, Chapter 3.

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