Let's carefully examine each statement regarding option contracts to determine their correctness.

An option contract is a financial derivative that gives the buyer the right, but not the obligation, to either buy or sell an underlying asset (like a stock) at a predetermined price (known as the strike price) on or before a specific date (the expiration date). There are two main types of options: call options and put options.

Analyzing Statement I: Call Option Definition Accuracy

Statement I says: "An option which gives its holder the privilege of selling to other party a fixed amount of some stock at a stated price on or before a predetermined date is known as call option."

Let's break down the key parts of this statement:

• The holder has the privilege of selling the stock.
• The transaction is at a stated price (strike price).
• The transaction can occur on or before a predetermined date (expiration date).

The universally accepted definition of a call option is a contract that gives the holder the right to buy an underlying asset at a specified price on or before a specific date. Conversely, a put option gives the holder the right to sell an underlying asset at a specified price on or before a specific date.

Since Statement I describes the right to sell the stock, it is describing a put option, not a call option as stated. Therefore, Statement I is incorrect.

Analyzing Statement II: Put Option Definition Accuracy

Statement II says: "In an option, the holder has the privilege of purchasing from other party a fixed amount of some stock at a stated price on or before a predetermined date is known as put option."

Let's look at the key aspects of this statement:

• The holder has the privilege of purchasing (buying) the stock.
• The transaction is at a stated price (strike price).
• The transaction can occur on or before a predetermined date (expiration date).

As discussed before, a put option gives the holder the right to sell an underlying asset at a stated price. The right to purchasing (buying) an underlying asset at a specified price on or before a specific date is the definition of a call option.

Since Statement II describes the right to purchasing (buying) the stock, it is describing a call option, not a put option as stated. Therefore, Statement II is incorrect.

Conclusion on Option Statements Correctness

Based on our analysis:

• Statement I incorrectly defines a call option by describing a put option (the right to sell).
• Statement II incorrectly defines a put option by describing a call option (the right to buy).

Both statements are incorrect regarding the definitions of call and put options.

Revision Table: Call and Put Option Definitions

Therefore, both Statement I and Statement II are incorrect.

Additional Information on Option Types and Trading

Understanding the basic mechanics of call and put options is crucial for anyone interested in financial markets or derivatives trading. The holder of an option pays a premium for this right. The seller (or writer) of the option receives the premium and is obligated to fulfill the contract if the holder decides to exercise the option.

• A call option holder makes money if the price of the underlying asset rises above the strike price by the expiration date.
• A put option holder makes money if the price of the underlying asset falls below the strike price by the expiration date.
• Option contracts can be either American-style (exercisable any time up to expiration) or European-style (exercisable only at expiration).

These definitions are fundamental to options trading strategies.