Simple Options S7 Question

[sundance86]

I read this as the question was comparing the amount of loss you could have in a long call compared to a long underlying if the underlying went down, and how your loss on a call buy is limited to the purchase price of the call instead of the long underlying having a potential risk to 0.

 

[Ebo]

The purchase of a call does NOT limit your downside if you are long the underlying. It magnifies your downside potential.
You would buy a put or write a call if you are long the underlying.

 

[JackR]

Quote from bouncingsoul:


"The purchaser of a call option would limit the amount of money he could lose if the underlyning stock declined."

I think you folks are reading too much into what we have to work with.

Depending on the way the question was asked and the other multiple choice answers, if the question was about money and not ROI the answer is correct. If about ROI, then we'd need to see the other answers as this one would not be correct.