What is a benefit of purchasing a call option for an investor?

Purchasing a call option offers investors the opportunity to speculate on the price movement of a stock while limiting their potential losses. When an investor buys a call option, they pay a premium for the right—but not the obligation—to buy the underlying stock at a predetermined price (the strike price) before the option expires.

If the stock price rises above the strike price, the investor can choose to exercise the option, buying the stock at the lower strike price and potentially selling it for a profit. If the stock price does not rise as expected, the investor can let the option expire without exercising it, losing only the premium paid for the option and nothing more. This structure effectively caps their losses, as they are not obligated to buy the stock, whereas if they had bought the stock directly, they would face the risk of losing the entire investment should the stock price fall dramatically.

In contrast to the other options, the benefits of purchasing a call option do not guarantee profits, do not require the exercise of the option to avoid losses, and while profits can indeed be substantial, they aren't unlimited in the same way that direct stock ownership might be perceived without certain constraints. This distinction illustrates the strategic advantage call options can provide in managing risk while allowing for upside potential