Assume an investor owns a portfolio of stocks. He goes to a seminar on stock options and comes up with an idea. He decides he will write (sell) calls on his stocks. He recognizes that in doing so he is giving away some of the "upside" of his portfolio, as some of his gains will necessarily go to the buyer of his calls if his stock prices rise significantly. He intends to take the proceeds from the sale of calls and use the money to buy puts on his stocks. He recognizes that doing so will insure him from the full effect of a drastic loss should stock prices fall dramatically. His goal overall was to reduce the amount of financial risk in his stock portfolio. Assuming your finance professor agrees that he will achieve that goal with this strategy, what else do you think it is fair to expect will happen with regard to this person's total returns from his investing activities - including the option purchases and sales as described - as compared to what they would have been had he not purchased/sold the options? Choose the best answer. His expected/actual returns would have been exactly the same with or without the options, as he gains with the puts, and loses equally on the calls in all circumstances. His expected/actual returns would have been lower without the options as he now collects money for the calls he is selling and that adds to his returns. His expected/actual returns would have been higher without the options as there is no free lunch, and with reduced risk comes reduced Er. His expected/actual returns would have been lower without the options as he would not have had the "insurance" that comes from buying puts