Option Contracts Terminology and Definitions Learning about option contracts includes learning words you're probably familiar with but are being used in new ways to discuss options. Make sure you understand the terminology by answering the following questions: True or False: Magdalena holds an option contract written by Lucia. Magdalena notified Lucia that she decided to exercise her option. Lucia must honor Magdalena's decision. O True O False True or False: When Magdalena bought the option from Lucia, she paid Lucia a fee called a premium. O False O True True or False: Lucia wrote the option and owns the underlying stock. Lucia wrote a covered option. False O True True or False: Miley holds many options. If she decides to exercise any of them, the transaction will be at a price Miley thinks is fair True True or False: Lucia wrote the option and owns the underlying stock. Lucia wrote a covered option. O False True True or False: Miley holds many options. If she decides to exercise any of them, the transaction will be at a price Miley thinks is fair. O True O False True or False: Lillie holds a put option. If she exercises her option, Libe will buy the optioned asset. O True O False True or False: Lillie let her option contract expire without exercising the option. Her decision is typical. O True O False