The Payoffs from Investing in Options Are Designed So That

question 90

Multiple Choice

The payoffs from investing in options are designed so that:

• A) both buyers and sellers can profit.
• B) the seller's (buyer's) gain is the buyer's (seller's) loss.
• C) roughly 20% of sellers and 50% of buyers profit.
• D) few buyers or sellers profit; they buy "insurance."

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Definitions:

Uncertainty

The state of having limited knowledge where it is impossible to exactly describe the existing state, a future outcome, or more than one possible outcome.

Economic Factors

Variables and conditions affecting an economy’s performance, such as inflation rates, interest rates, employment levels, and gross domestic product (GDP).

Demand Uncertainty

The unpredictability of customer demand, making it difficult for businesses to accurately forecast sales.

Price Uncertainty

Refers to the fluctuation in the prices of goods or services in a market, which can be due to various factors including demand, supply, and external economic conditions.