Series 7 practice questioneasyOptions — Call Options Max Gain/Loss
What is the maximum loss for a buyer of a call option?
- AThe strike price
- BThe premium paid✓ Correct answer
- CUnlimited
- DThe difference between the strike price and the market price
Explanation
Why B — The premium paid
The maximum loss for a call buyer is limited to the premium paid for the option. If the stock price stays at or below the strike price, the option expires worthless and the buyer loses only the premium. This is one of the key advantages of buying options.
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