The seller of a call option has:
A) Substantial opportunity for gain and limited risk of loss
B) Substantial risk of loss and substantial opportunity for gain
C) Limited risk of loss and limited opportunity for gain
D) Substantial risk of loss and limited opportunity for gain

Question

Quizplus · Accepted Answer

The seller of a call option has limited opportunity for gain as their profit potential is limited to the premium received from the buyer of the option. However, they have substantial risk of loss as they are obligated to sell the underlying asset at the strike price, which may result in significant losses if the market price of the asset rises above the strike price.

The Seller of a Call Option Has