Buying an option to either buy or sell a stock
Not what you're looking for?
Why would an investor buy an option to either buy or sell a stock?
Purchase this Solution
Solution Summary
Answer to a question on why would an investor buy an option to either buy or sell a stock.
Solution Preview
Why would an investor buy an option to either buy or sell a stock?
The main reason for owning options is leverage. Buying a call option is a bet that a stock will rise above the call option's strike price before the option expires. Buying a put option is a bet that a stock will fall below the put option's strike price before the option expires. Thus the options are considerably more risky than buying a stock outright, because the option expires within months and if the stock doesn't rise (for call option) or fall (for put option) by then, the entire investment is lost. This risk is taken by investors in options ...
Purchase this Solution
Free BrainMass Quizzes
Academic Reading and Writing: Critical Thinking
Importance of Critical Thinking
MS Word 2010-Tricky Features
These questions are based on features of the previous word versions that were easy to figure out, but now seem more hidden to me.
Business Processes
This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.
Production and cost theory
Understanding production and cost phenomena will permit firms to make wise decisions concerning output volume.
Team Development Strategies
This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.