SIE practice questionhardOptions
A customer sells an uncovered call. What is the risk?
- ALimited loss equal to the option premium
- BUnlimited loss if the underlying security rises sharply✓ Correct answer
- CNo risk, as the position is covered
- DMaximum loss is the strike price minus premium
Explanation
Why B — Unlimited loss if the underlying security rises sharply
A naked (uncovered) call writer faces unlimited risk if the underlying rises, as the stock can be called away at any price.
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