The graph shows increasing profit as the underlying asset price increases, which is characteristic of a call option. The flat line represents the maximum potential loss, which is the premium paid for the option. Therefore, this is a profit diagram for the buyer of a call option.

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Figure 1 Depicts the

Question 13

Multiple Choice

Figure 1 depicts the Figure 1 depicts the A) position diagram for the buyer of a call option. B) profit diagram for the buyer of a call option. C) position diagram for the buyer of a put option. D) profit diagram for the buyer of a put option.

A) position diagram for the buyer of a call option.
B) profit diagram for the buyer of a call option.
C) position diagram for the buyer of a put option.
D) profit diagram for the buyer of a put option.

Correct Answer: