Question
Which if the following is FALSE regarding options and futures? A. A short call option exposes the seller to unlimited potential loss. B. Buying a
Which if the following is FALSE regarding options and futures?
A. A short call option exposes the seller to unlimited potential loss.
B. Buying a put option is like buying insurance on an asset. If the assets price declines, the put holder can sell the asset at the strike price to defray any losses in the assets value.
C. A long call option gives the holder the right to buy an asset at the strike price whereas a long futures position obligates the holder to buy the asset at the futures price.
D. In a short put option, the sellers maximum loss is the strike price
E. Derivatives such as options and futures are risky securities and therefore rarely used for hedging purposes since hedging is designed to reduce risk.
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