The maximum loss a buyer of a stock call option can suffer is equal to
A)the striking price minus the stock price.
B)the stock price minus the value of the call.
C)the call premium.
D)the stock price.

Question

Quizplus · Accepted Answer

The maximum loss a buyer of a stock call option can suffer is the premium paid for the option. This is because the buyer has the right to choose not to exercise the option if it would result in a loss, limiting their potential losses to the amount of the premium paid. Options traders use this limited-risk strategy as a way to protect themselves from larger losses while still participating in potential gains.

The Maximum Loss a Buyer of a Stock Call Option