Which term describes the options that allow individuals to buy and sell stock?

Which term describes the options that allow individuals to buy and sell stock?

• A. Promissory note
• B. Option trading
• C. Drafts
• D. Time draft

Answer: (B)

The correct term that describes the options allowing individuals to buy and sell stock is option trading. Option trading refers to the practice where investors purchase contracts that give them the right, but not the obligation, to buy or sell an underlying stock at a predetermined price within a specific timeframe. This financial derivative enables traders to speculate on the future price movements of stocks, hedge against potential losses, or leverage their investments, making it a significant component of financial markets. Other terms listed do not specifically relate to the process of buying and selling stocks. A promissory note is a financial instrument that contains a written promise to pay a specified amount of money to a designated person at a certain time. Drafts are orders to pay a specified amount of money and are primarily used in banking, while time drafts are a specific type of draft that allows for deferred payment. None of these terms relate directly to the trading of stock options.

The correct term that describes the options allowing individuals to buy and sell stock is option trading. Option trading refers to the practice where investors purchase contracts that give them the right, but not the obligation, to buy or sell an underlying stock at a predetermined price within a specific timeframe. This financial derivative enables traders to speculate on the future price movements of stocks, hedge against potential losses, or leverage their investments, making it a significant component of financial markets.

Other terms listed do not specifically relate to the process of buying and selling stocks. A promissory note is a financial instrument that contains a written promise to pay a specified amount of money to a designated person at a certain time. Drafts are orders to pay a specified amount of money and are primarily used in banking, while time drafts are a specific type of draft that allows for deferred payment. None of these terms relate directly to the trading of stock options.