<p>I'd say if the investment would cover the same amount of shares (100 shares vs a call option for 100 shares), then the option is safer, the most you can lose is the premium which should be relatively small compared to the full stock value.</p>
<p>But if the investmemt is for the same amount of money (100 shares vs the same amount of money for many call options for 100 shares each), then the options are riskier as if the stock ends up <span class="math-container">$\leq \\\$ 100$</span>, then you'd lose all that money, which wouldn't happen with the stock unless the very unlikely event that the company suddenly goes bankrupt happens.</p>

CC BY-SA 4.0
2023-03-02T13:54:39.790Z
2023-03-02T13:54:39.790Z
Nicolas Torres
<p>I've been asked this question by my professor, but I'm not sure about the answer:
&quot;A broker proposes you two type of investment: the first is buying 100 shares of the company X at the current value of \$100 per share, the second is to buy a call option on the same shares at a strike price of \$100 per share, that is the same of the current value, expiring in 60 days. What investment is riskier between the two, and why?&quot;</p>
<p>The premium that must be paid to have the option is not mentioned. I'd say buying the call option is safer, but this is not very clear to me. Some hints?</p>

CC BY-SA 4.0
2023-02-28T14:59:18.067Z
What happens to your money if the stock falls to $10 per share in 60 days if you own the stock outright, vs owning the option?
AKdemy
CC BY-SA 4.0
2023-02-28T15:30:03.447Z
Well, if I own the stocks, I've lost $90 per share, while if I own the option I'm not exercising it and I've lost just the premium, correct?
ar em
CC BY-SA 4.0
2023-02-28T22:20:20.723Z
Sounds like you've answered your own question here. An option can be less risky, because you are not committing, you simply have the option. That doesn't mean its the better investment, because you have to pay a premium for that .
BB King
<asset-pricing><risk>
Stocks and call option
ar em
# Stocks and call option

(Asked by: username_0 on 2023-02-28)

I've been asked this question by my professor, but I'm not sure about the answer:
"A broker proposes you two type of investment: the first is buying 100 shares of the company X at the current value of \$100 per share, the second is to buy a call option on the same shares at a strike price of \$100 per share, that is the same of the current value, expiring in 60 days. What investment is riskier between the two, and why?"

The premium that must be paid to have the option is not mentioned. I'd say buying the call option is safer, but this is not very clear to me. Some hints?

**Tags:** asset-pricing, risk

> **Comments:**
> **username_1**: What happens to your money if the stock falls to $10 per share in 60 days if you own the stock outright, vs owning the option?  
> **username_0**: Well, if I own the stocks, I've lost $90 per share, while if I own the option I'm not exercising it and I've lost just the premium, correct?  
> **username_2**: Sounds like you've answered your own question here. An option can be less risky, because you are not committing, you simply have the option. That doesn't mean its the better investment, because you have to pay a premium for that .  

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## 1 answers

### Answer by username_3 on 2023-03-02. Score: 1

I'd say if the investment would cover the same amount of shares (100 shares vs a call option for 100 shares), then the option is safer, the most you can lose is the premium which should be relatively small compared to the full stock value.

But if the investmemt is for the same amount of money (100 shares vs the same amount of money for many call options for 100 shares each), then the options are riskier as if the stock ends up $\leq \\\$ 100$, then you'd lose all that money, which wouldn't happen with the stock unless the very unlikely event that the company suddenly goes bankrupt happens.


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