SIE practice questionmediumOptions — Assignment
Which party in an options transaction has an OBLIGATION rather than a right?
- AThe exchange
- BThe option buyer (holder)
- CThe option seller (writer)✓ Correct answer
- DThe OCC
Explanation
Why C — The option seller (writer)
The option SELLER (writer) has the obligation to fulfill the contract if exercised. Call writers must sell stock at the strike; put writers must buy stock at the strike. Buyers have rights, not obligations — they choose whether to exercise. The OCC facilitates but does not bear the primary obligation. Sellers receive premium as compensation for accepting this obligation.
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