GARP Financial Risk and Regulation (FRR) Series 2016-FRR Question # 86 Topic 9 Discussion
2016-FRR Exam Topic 9 Question 86 Discussion:
Question #: 86
Topic #: 9
Which one of the following four statements correctly describes an American call option?
A.
An American call option gives the buyer of that call option the right to buy the underlying instrument on any date up to and including the expiry date.
B.
An American call option gives the buyer of that call option the right to sell the underlying instrument on any date up to and including the expiry date.
C.
An American call option gives the buyer of that call option the right to buy the underlying instrument on the expiry date.
D.
An American call option gives the buyer of that call option the right to sell the underlying instrument on the expiry date.
An American call option allows the holder to purchase the underlying asset at any time before the option's expiration. This is in contrast to a European call option, which can only be exercised at the expiry date. The ability to exercise at any time gives the American option greater flexibility and potential value.
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