Options Trading
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Questions and Answers

Which of the following best describes a call option?

  • An option that gives the holder the right to buy an underlying asset at a specified price within a specific time period (correct)
  • An option that gives the holder the right to buy an underlying asset at any time
  • An option that gives the holder the right to sell an underlying asset at a specified price within a specific time period
  • An option that gives the holder the right to sell an underlying asset at any time

    • Which of the following best describes a put option?

  • An option that gives the holder the right to sell an underlying asset at a specified price within a specific time period (correct)
  • An option that gives the holder the right to sell an underlying asset at any time
  • An option that gives the holder the right to buy an underlying asset at any time
  • An option that gives the holder the right to buy an underlying asset at a specified price within a specific time period

    • What is the maximum potential loss for a buyer of a call option?

  • Unlimited
  • The strike price
  • The strike price minus the premium paid for the option
  • The premium paid for the option (correct)

    • What is the maximum potential loss for a buyer of a put option?

    <p>The premium paid for the option</p> Signup and view all the answers

    Which of the following is true about short selling?

    <p>It involves selling a security that the seller does not own</p> Signup and view all the answers

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