UGC NET COMMERCE December 2018 Q35

0. Choose the correct code for the following statements being correct or incorrect.
Statement I: An option which gives its holder the privilege of selling to other party a fixed amount of some stock at a stated price on or before a predetermined date is known as call option.
Statement II: In an option, the holder has the privilege of purchasing from other party a fixed amount of some stock at a stated price on or before a predetermined date is known as put option.

Answer
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Option : D
Explanation : TYPES OF OPTIONS
There are two basic types of stock options which can be used separately or combined to derive two additional types of options. Fundamentally, the holder of an option merely possesses the right to buy or sell a specific asset. The option contract specifies between the period of time allowed to exercise this right and the price. The main types of stock options are listed below:
1. Put Option
A put is an option to sell. A put gives its holder the privilege of selling or putting — to a second party a fixed amount of some stock at a stated price on or before a predetermined date.
2. Call Option
Analogously, a call is an option to purchase, its holders has the privilege of purchasingor- calling from a second party a fixed amount of some stock at a stated price on or before a predetermined day.

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