SIE practice questioneasyLong/short positions
What is the maximum loss for the buyer of an option contract?
- AStrike price minus premium
- BUnlimited
- CThe premium paid✓ Correct answer
- DThere is no loss possible
Explanation
Why C — The premium paid
Option buyers can only lose the premium paid. Sellers can have unlimited loss on uncovered calls, but buyers are limited to the premium.
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