Options are perceived as a new financial product by many, but like forwards, they were used several hundred years ago in trading during ancient civilizations. Now, with their usage in the Over- the- Counter (OTC) and derivatives market in Europe, the United Kingdom, the United States and later in Asian markets, options cannot be considered new financial instruments but have long played a big role in the economy.

a)Why do you consider that an option is a more flexible instrument in your strategic financial planning? (2 Marks)

b)Differentiate the term 'at-the-money as compared to in-the-money and out-of-money in an options trade. (3 Marks)