Someone who purchases a call option is really buying insurance to protect against:
A) the stock not being available when they want to purchase it.
B) the price of the stock falling.
C) a seller not being able to deliver the stock.
D) the price of the stock rising.

Question

Quizplus · Accepted Answer

Someone who purchases a call option is betting on the price of the stock rising in the future. If the price goes up, they can exercise their option and purchase the stock for a lower price than it is currently worth. Therefore, buying a call option is not protecting against the stock being unavailable, the price falling, or a seller not being able to deliver the stock, but rather it is a bullish strategy to potentially profit from a stock price increase.

Someone Who Purchases a Call Option Is Really Buying Insurance