Question

Who pays the option Premium?

• A. Put Seller
• B. Call Seller
• C. Writer of an Option
• D. Call Buyer

Hint:

Remember: Buyer of an option = Premium payer. Seller/Writer of an option = Premium receiver. This applies to both calls and puts.

Answer 1

The Correct Option is D

Step 1: Understanding the Concept:
In an options contract, the buyer has the right (not obligation) to buy or sell, while the seller has the obligation.
Step 2: Detailed Explanation:
To acquire this "right," the buyer must pay a fee to the seller. This fee is known as the "Premium."
The "Writer of an Option" is the seller, who receives the premium.
Therefore, whether it is a Call or a Put, the "Buyer" is always the one paying the premium.
Step 3: Final Answer:
(D) Call Buyer