Products & Their RisksQuestion 94 of 398
What is the maximum loss for the buyer of a call option?
a.Unlimited
b.The premium paid
c.The strike price times 100
d.The difference between strike and market price
Explanation
The most a call buyer can lose is the premium paid, which occurs if the option expires out-of-the-money and worthless. This limited, defined risk is a key attraction of buying options, while the potential gain on a long call is theoretically unlimited as the stock rises.
Practice all 398 questions free — no signup required.
Related questions on this topic
- An option premium is composed of:
- An investor owns 100 shares of a stock and sells one call option against those shares. This strategy is:
- An investor holds a long stock position and buys a put on that stock to limit downside risk. This is known as:
- What is the maximum gain for the writer of a put option?
- An investor buys one XYZ call with a $30 strike for a $2 premium. At expiration XYZ trades at $35 and the investor exercises. Ignoring commissions, what is the investor's net profit per share?
- A general obligation (GO) municipal bond is backed primarily by:
Last reviewed: · editorial process
PrepPass Editorial Team · Verified against FINRA Securities Industry Essentials (SIE) Exam · How we review