What is Options Trading?

• A. Buying or selling the right to buy stock in the future by a fixed time, at a certain price.
• B. A plan to purchase futures contracts.
• C. A type of debt instrument.
• D. A warehouse receipt for commodities.

Answer: (A)

Options trading involves contracts that give the holder the right, but not the obligation, to buy or sell an underlying asset at a set price before a specific expiration date. The statement matches this idea by describing the right to buy stock in the future by a fixed time at a certain price, which is the core feature of options. These contracts can be calls (the right to buy) or puts (the right to sell) and are defined by a strike price and an expiration date. This contrasts with futures, which require both parties to transact at a future date, and with debt instruments or warehouse receipts, which involve lending/borrowing or storage documents rather than trading rights to buy or sell.