The purchase of a call option can be used to guarantee that the maximum price that will be paid in the future is the strike price plus the option price.

Question

Quizplus · Accepted Answer

When a call option is purchased, it gives the buyer the right, but not the obligation, to purchase the underlying asset at the strike price. Therefore, buying a call option can help guarantee that the maximum price paid for the asset in the future is the strike price plus the cost of the option. If the market price of the underlying asset rises above the strike price, the buyer of the call can exercise the option and purchase the asset at the lower strike price plus the cost of the option.

The Purchase of a Call Option Can Be Used to Guarantee