To maximize his/her potential upside returns,ceteris paribus,an investor who was bullish on a particular stock would execute which of the following options strategies:
A)buy calls
B)write calls
C)buy puts
D)write puts

Question

Quizplus · Accepted Answer

Buying calls gives the investor the right, but not the obligation, to purchase the stock at a predetermined price, known as the strike price. If the stock price increases above the strike price, the investor can exercise the option and purchase the stock at the lower strike price and then sell it at the higher market price, generating a profit. This allows the investor to maximize their potential upside returns while limiting their potential losses to the premium paid for the option. Writing calls (B) and writing puts (D) are bearish options strategies that generate income but limit potential gains, while buying puts (C) is a bearish strategy that profits from a decrease in the stock price.

To Maximize His/her Potential Upside Returns,ceteris Paribus,an Investor Who Was