If an Investor Buys an Option Assuming a Stock Has

question 65

True/False

If an investor buys an option assuming a stock has bottomed out, but the stock continues to fall, the most he or she can lose is the price of the option, including commissions.

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Definitions:

Indirect Costs

Expenses that are not directly traceable to a specific product or process, such as utilities or administrative salaries.

Contribution Margin

is the amount of revenue left after deducting variable costs, which can be used to cover fixed costs and contribute to profits.

Variable Cost Per Unit

The cost that changes with the level of output or sales, calculated on a per-unit basis.

Planning Horizons

The timeframe over which strategic planning and decision-making processes are projected and analyzed, ranging from short to long term.