Question

A registered representative sends a prospecting letter to customers stating that significant profits can be achieved by purchasing call options in a rising market. This claim:

Answer 1

B) must be balanced by a statement that trading options can also result in significant losses.

Step-by-step explanation:

Representatives do not trade securities by themselves, they only enter orders on behalf of their clients and following their clients' orders. That means that the clients assume the risk of losing money due to a bad investment. The clients are also the ones that benefit the most since it is their money being invested. Any statement that states the possibility of significant earnings, must also include the possibility of significant losses.