MCQ Detailed View

In an options contract, the buyer must pay an upfront fee to the seller in order to gain the right, but not the obligation, to buy (call option) or sell (put option) the underlying asset. This fee is known as the option premium, often referred to as the call premium when dealing with call options. It compensates the seller for taking on the risk of the contract and depends on factors such as the underlying asset’s price, strike price, time to expiration, and market volatility.