Question

A trader holding a long put option position has: the right to buy the underlying asset at a fixed price on a fixed date.

a) the right to sell the underlying asset at a fixed price on a fixed date.
b) the obligation to buy the underlying asset at a fixed price on a fixed date if the option is exercised.
c) the obligation to sell the underlying asset at a fixed price on a fixed date if the option is exercised.
d) None of the other answers is correct

Answer 1

A trader holding a long put option position actually has the right to sell the underlying asset at a fixed price on or before the expiration date. Therefore. so, the correct answer is a) the right to sell the underlying asset at a fixed price on a fixed date.

Step-by-step explanation:

A long put option gives the holder the right (but not the obligation) to sell the underlying asset at the specified strike price.

The trader may choose to exercise this right if the market price of the underlying asset is below the strike price, allowing them to benefit from the price difference.

This is a bearish strategy, as the trader profits from a potential decline in the value of the underlying asset.

Therefore, the correct answer is a) the right to sell the underlying asset at a fixed price on a fixed date.