Which of the following would NOT be a benefit of purchasing call options for the stocks of a number of different companies?

[A] If the underlying stocks decline, the investor's losses would be limited to the amount of the premiums.

[*B] By exercising the calls early, the investor could limit the risk in his portfolio.

[C] If the underlying stocks moved upward, the investor could participate in this upward movement.

[D] Added diversification would be provided to the investor only until the calls expire.

Question

Business

Mira Villarreal

24 March, 21:39

Which of the following would NOT be a benefit of purchasing call options for the stocks of a number of different companies?

[A] If the underlying stocks decline, the investor's losses would be limited to the amount of the premiums.

[*B] By exercising the calls early, the investor could limit the risk in his portfolio.

[C] If the underlying stocks moved upward, the investor could participate in this upward movement.

[D] Added diversification would be provided to the investor only until the calls expire.

+1

Answers (1)

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Thelma · Answer 1

Answer: Option B

Explanation:

Call option is the purchase of the right to purchase the product at a fixed price before the time agreed. Buying call options, would limit the risk level to the premiums paid for the calls. So the option A is correct and by the exercise of this call option early cannot limit risk on the portfolio. The remainder two are the benefit of purchasing call options.