Which of the Following Strategies Has the Greatest Potential Loss

question 7

Multiple Choice

Which of the following strategies has the greatest potential loss?

• A)an uncovered call
• B)a long put
• C)a covered call
• D)a long position in the stock
• E)it is impossible to tell

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Definitions:

Equity Funds

Investment funds that predominantly hold stocks or equities in their portfolios.

Index Funds

Mutual funds or ETFs designed to replicate the performance of a specific market index, such as the S&P 500, by holding the same stocks in the same proportions.

Front-end Load

A charge or fee paid by an investor at the time of purchasing shares of a mutual fund or an investment, typically used to cover sales commissions.

Expense Ratio

The annual fee that all mutual funds and ETFs charge their shareholders, expressed as a percentage of the fund's average net assets.