A call option gives the holder the right to which action?

• A. Right to sell the underlying asset at a specified price
• B. Right to buy the underlying asset at a specified price
• C. Obligation to buy the asset at the market price
• D. Right to borrow the asset

Answer: (B)

A call option gives the holder the right to buy the underlying asset at a predetermined price (the strike price) within a certain period. This is an optional right, not an obligation, so you would exercise it only if the market price exceeds the strike price, allowing you to buy cheaply and potentially profit from the difference. The other ideas describe different concepts: selling at a set price would be the domain of a put option; being obliged to buy at the market price isn’t how calls work since there’s no obligation to transact at market price; borrowing the asset isn’t part of a basic call option.