A speculator may choose to buy a call option because
A) the possible gain is greater than with a futures contract.
B) the potential loss on the call is limited to the premium, while the potential loss is unlimited with a futures contract.
C) the possible gain with the option is great than the possible gain from buying the underlying stock itself.
D) calls eliminate the risk of loss so a speculator can lose nothing or just make a gain.

Question

Quizplus · Accepted Answer

Buying a call option limits the potential loss to the premium paid while the potential loss with a futures contract is unlimited. This makes it a more suitable choice for speculators as it limits their downside risk. The other options listed are not accurate.

A Speculator May Choose to Buy a Call Option Because