Canadian Securities Course (CSC) Practice Exam

What distinguishes LT Equity Anticipation from a regular option?

1. Expiration time

2. Risk/reward profile

3. Underlying asset

4. Trading location

The correct answer is: Risk/reward profile

LT Equity Anticipation differs from a regular option in the sense that it has a different risk and reward profile. While regular options have a fixed risk/reward ratio, LT Equity Anticipation has a pre-determined risk and unlimited potential for reward. This means that the potential for profit in LT Equity Anticipation is significantly higher, but there is also a greater risk of loss. The other options, such as expiration time, underlying asset, and trading location, may vary between LT Equity Anticipation and regular options, but they do not necessarily distinguish one from the other. For instance, regular options may also have longer expiration times or trade on different locations, and the underlying asset for LT Equity Anticipation may be the same as a regular option. Therefore, the correct answer is B, as it is the distinguishing factor between LT Equity Anticipation and regular options.