Question

QUESTION 29

1. Mr. Lau, CFA and Mr. Go, CFA are involved in a transaction involving put option for the stocks of Apple. Mr. Lau exercised the option before the expiration date. Which of the following statements below is most accurate?

	a.	The transaction involves a contingent claim where Mr. Go has a contingent claim to buy the Apple stocks from Mr. Lau.
	b.	Mr. Go has an obligation to sell the Apple stocks to Mr. Lau.
	c.	Mr. Go has an obligation to buy the Apple stocks from Mr. Lau.

Answer 1

The transaction involves a contingent claim where Mr. Go has a contingent claim to buy the Apple stocks from Mr. Lau.

Option A is correct

Explanation:

Option Contact involves contingency whether the option buyer will exercise the option or not.