The seller of an option will always __________ when the option is exercised, so: a lose;...

The seller of an option will always __________ when the option is exercised, so:

a		lose; the buyer of an option pays a premium to the seller of the option as compensation for the risk of loss that the option seller takes.
b		lose; the seller of an option will also have an option to get out of the option contract.
c		profit; the cost of options is very low.
d		profit; the seller of the option will agree to share the profit with the buyer of the option.

Solutions

Expert Solution

Ans a) lose; the buyer of an option pays a premium to the seller of the option as compensation for the risk of loss that the option seller takes.

Seller is under obligation to execute the contract while the buyer has the right to decide whether to execute the contract or not. For taking this right, the buyer pays a premium to the seller of the contract.

jeff jeffy answered 1 year ago

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