Products & RisksQuestion 28 of 125
An investor buys 1 XYZ call option with a strike price of 50 for a premium of 3. What is the maximum loss on this long call position?
a.Unlimited
b.$5,000
c.$4,700
d.$300
Explanation
The buyer of a call can lose no more than the premium paid. Here the premium is 3 points times the 100-share multiplier, or $300. If the stock stays at or below 50, the option expires worthless and the $300 premium is the entire loss.
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