SIE practice questionmediumOptions Strategies
A client buys a call option. What is the maximum loss the client can experience?
- AThe full value of the underlying stock
- BThe difference between strike price and market price
- CUnlimited loss
- DThe premium paid for the option✓ Correct answer
Explanation
Why D — The premium paid for the option
Buying calls limits loss to the option premium, while selling uncovered calls exposes investors to unlimited risk. The difference between strike and market price only matters if exercised, and buying does not risk the entire underlying value.
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