SIE practice questionhardOptions Strategies
Which of the following options strategies exposes an investor to unlimited loss potential?
- ASelling covered call options
- BBuying call options
- CSelling uncovered call options✓ Correct answer
- DBuying put options
Explanation
Why C — Selling uncovered call options
Selling uncovered (naked) calls exposes investors to unlimited loss if the stock rises. Buying calls/puts limits loss to the premium, and covered calls limit risk to the difference between strike and initial cost.
Turn it into reps
Reading one answer is not the same as being ready
Lucky the Banker is a free practice app with 1,867+ SIE questions, weak-area tracking, and timed mock exams. No credit card, no paywall.
Spot an error in this question or explanation? Tell us — we fix these fast.
Related Options questions
- Before a customer can trade options, a representative must:
- A client buys a call option. What is the maximum loss the client can experience?
- A new client wants to write uncovered options. The firm must:
- A customer buys a call option for $5 on a stock currently at $45 with a $50 strike. What is the breakeven price?
- The approval of an options account must be performed by which individual?
- A customer sells an uncovered call. What is the risk?
- What must a firm provide to a customer before options trading is permitted?
- An investor owns 100 shares of DEF, currently trading at $60. They write 1 DEF 65 call at $2 and buy 1 DEF 55 put at…