Option Rights and Expiration

This question tests your understanding of a basic derivatives concept, the difference between having a right and having an obligation. In interviews, bankers want to see that you can explain how an option gives the holder the choice to buy or sell an underlying asset at a preset price, while recognizing that this choice only exists until the expiration date. It also checks whether you understand why optionality has value and how that value disappears if the holder does not exercise before time runs out.