Which of the following are advantages of using options for futures speculation?
I. increased leverage
II. Potential losses are limited to the cost of the option.
III. Options are available on a broad range of commodity, index, and currency futures.
IV. Investors avoid the possibility of having to take delivery of the commodity.
A) I and II only
B) II and III only
C) I, II and IV only
D) I, II, III and IV
Answer: D
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What is the future value of a series of $5,000 end-of-the-year cash flows to be received forever if the required rate of return is 6.00% per year and the first cash flow is one year from today?
A) $83,333,333.33 B) $8,333,333.33 C) $83,333.33 D) This question cannot be solved for a future value.