If a customer buys back an option which was previously written, the transaction is referred to as a(n):(A)Opening purchase(B)Ope

Question

r-ruslan [8.4K]

3 years ago

12

If a customer buys back an option which was previously written, the transaction is referred to as a(n):(A)Opening purchase(B)Ope

ning sale(C)Closing sale(D)Closing purchase

Business

1 answer:

Fynjy0 [20] · Answer 1 · 2022-09-11T01:45:58+03:00

Answer:

The correct answer is letter "D": Closing purchase.

Explanation:

Traders buy back an asset that was previously purchased to close that position. In such cases, traders have a short position of the asset, which implies they are expecting the price of the asset to go down to make a profit. When talking about options, the option buyback allows the trader to exit the position closing the purchase.