BUISENESS MANAGEMENT
RISK MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Unable to sell contract before payment deadline
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A high-risk contract
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The contract has no flexibility
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None of the above
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Detailed explanation-1: -The downside potential is the premium that you spent. You want the price to go down a lot so you can sell it at a higher price. Call writers: If you sell a call, you are selling the right to purchase to someone else. The upside potential is the premium for the option; the downside potential is unlimited.
Detailed explanation-2: -Like other securities including stocks, bonds and mutual funds, options carry no guarantees. Be aware that it’s possible to lose the entire principal invested, and sometimes more. As an options holder, you risk the entire amount of the premium you pay.
Detailed explanation-3: -Option contracts are notoriously risky due to their complex nature, but knowing how options work can reduce the risk somewhat. There are two types of option contracts, call options and put options, each with essentially the same degree of risk.