Question

Which of the following statements is not true?

	a.	Exercising an option involves buying or selling some asset.
	b.	The option price is the price paid to acquire the option.
	c.	An option is the right to buy or sell an underlying asset at the strike price.
	d.	After the expiration date the option becomes valuable.

Answer 1

The correct answer will be option (d) After the expiration date the option becomes valuable. It is because after the expiration date, the option becomes worthless as it is no longer excersisable "after" the expiration date. The other options (a), (b) and (c) are not correct because all these options are true.When we exercise an option then it involves buying or selling of some asset. The option price is actually the price which is paid to acquire the option. An option comes with the right to buy or sell an underlying asset at the strike price.