What is the most an investor can lose if sells a call on the firm's stock with an exercise price of $100?
A) $100
B) $0
C) $50
D) Unlimited losses

Question

Quizplus · Accepted Answer

If an investor sells a call option on the firm's stock with an exercise price of $100, there is no limit to how high the stock price can go. This means if the stock price rises above $100, the investor will have to sell the stock at $100, incurring a loss equal to the difference between the stock price and the exercise price. As the stock price can theoretically rise to any level, the potential losses for the investor are unlimited.

What Is the Most an Investor Can Lose If Sells