Consider buying call option, if price of stock falls then buyer of call option has

A. high potential of profit

B. low potential of profit

C. low potential of losses

D. high potential of losses

Answer: Option D

Solution(By Examveda Team)

Consider buying call option, if price of stock falls then buyer of call option has high potential of losses. Traders buy a call option in the commodities or futures markets if they expect the underlying futures price to move higher. Buying a call option entitles the buyer of the option the right to purchase the underlying futures contract at the strike price any time before the contract expires.