Chapter 02 · Section 2.1

Positions

Suppose that Lara, an investor, has a long position in 10 December 350 CMX gold futures calls.

Please select the true statements:

a) Lara has limited loss and unlimited profit potential.
• b) Lara has unlimited loss and limited profit potential.
  No. No, not (b). A call option gives its holder the choice of whether to exercise the option. The most Lara can lose is the premium she paid for the calls.
  c) Lara has the right to buy at 350 but no obligations.
  d) Lara has the obligation to buy at 350 if she is assigned
  e) a and c
  f) b and c

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