The Leverage Strategy of Buying Call Options Is Based on the Idea

question 72

Multiple Choice

The leverage strategy of buying call options is based on the idea that:

• A)a small change in the price of the underlying common stock can cause a large change in the price of the option.
• B)leverage reduces the risk of loss on the option contract.
• C)leverage reduces the risk of loss on the portfolio.
• D)None of the above

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Definitions:

Oedipus Complex

A Freudian theory that suggests a child's unconscious sexual desire for the opposite-sex parent and jealousy toward the same-sex parent.

Unconscious

A term in psychology referring to the part of the mind that is not currently in focal awareness, containing processes, memories, and desires beyond conscious access.

Preconscious

The part of the mind containing information that is not currently in focal awareness but can easily be accessed, as described in psychoanalytic theory.

Free Association

A psychoanalytic technique where the patient says whatever comes to mind, used to explore the unconscious.