Limited risk

Definition:

The risk inherent in options contracts, which is much lower than that of a futures contract, which has unlimited risk. The maximum loss in buying a call option, for example, is the premium paid for the option.

Investing Essentials


Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University

Term of the Day

Ratio Strategy

A strategy in which one has an unequal number of long secruities and short sercurities. Normally, it implies a preponderance of short options over either long options or long stock.

Subscribe to the Term of the Day via email Get the Term of the Day in your inbox!


Create your free portfolio