SIE Exam Question 528: Answer and Explanation

Question: 528

An investor sells a naked call on Omikron for a $250 premium. Which of the following is true regarding the investor's position?

• A. The investor is expecting Omikron stock to increase in value.
• B. The investor's potential loss is unlimited.
• C. The investor's potential loss is limited to $250.
• D. The investor's outlook for Omikron stock is bullish.

Correct Answer: B

Explanation:

By selling a naked call, the investor is expecting Omikron's stock price to decrease. If the stock increases in value, the investor's potential loss is unlimited.