SIE Exam Practice Question 449

Question: 449

Which of the following are true about an option?

I. The two parties are known as the buyer and the seller. The money paid by the buyer of the option is known as the option's premium.

II. The buyer has bought the right to buy or sell the security depending on the type of option.

III. It is a contract between two parties that determines the time and place at which a security may be bought or sold.

IV. The seller has an obligation to perform under the contract, possibly to buy or sell the stock depending on the option involved.

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