SIE practice questioneasyMax gain/loss calculations
What is the maximum loss for a buyer of a call option?
- AUnlimited
- BThe strike price
- CThe premium paid✓ Correct answer
- DThe current market price
Explanation
Why C — The premium paid
The maximum loss is the premium paid to purchase the call. Sellers (not buyers) have the potential for larger or unlimited losses; the market price and strike are not max loss.
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