What is a client's maximum loss if he is short KNP stock and short a KNP put?
What is a client's maximum loss if he is short KNP stock and short a KNP put? This is an example of a covered put (short stock + short put). The maximum loss is unlimited since there is no limit as to how high the stock price can rise.
Which of the following statements is true in relation to the buyer of a call option?
Which of the following statements is TRUE in relation to the buyer of a call option? A purchaser of a call option would have limited risk with the potential for unlimited profit.
Which of the following would protect a short May 50 put?
For a long call to cover a short call, it must have the same or lower strike price and the same or longer expiration. This ensures the investor may purchase the stock without financial loss and deliver it at 50 if the short call is exercised. Which of the following would protect a short May 50 put? A)Long June 55 put.
Which of the following option positions obligates the investor to sell shares if exercised against?
Which of the following option positions obligates the investor to sell shares if exercised? A short call position obligates the investor to sell shares if the option is exercised. You just studied 35 terms!
What's the maximum profit for the buyer of a call option?
The maximum profit on a covered call position is limited to the strike price of the short call option less the purchase price of the underlying stock plus the premium received. Suppose you buy a stock at $20 and receive a $0.20 option premium from selling a $22 strike price call.
What is the maximum value of a call option?
The maximum value of a call option is equal to the value of the underlying asset. This makes a lot of economic sense. An option allows you to buy a given asset at a certain exercise price.
What is the maximum gain on a long put?
Long Puts: The maximum gain = strike price – premium x 100.
What is the maximum payoff for being long a put?
The payoff diagram for a long put is straightforward. The maximum risk is limited to the cost of the option. The profit potential is unlimited until the underlying asset reaches $0. To break even on the trade at expiration, the stock price must be below the strike price by the cost of the long put option.
What is the maximum loss potential for a customer that is long a put option on a debt security?
What is the maximum loss potential for a customer that is long a put option on a debt security? When you purchase an option (put or call), the most you can lose is the premium paid to buy.
What is long put and short put?
A long put strategy would be used if an investor expected the stock's price to decrease. If an investor were to execute the short put strategy, then he would sell a put option and assume the role of the option writer. A short put strategy would be used if an investor expected the stock's price to increase.
What is long call and short put?
With options, buying or holding a call or put option is a long position; the investor owns the right to buy or sell to the writing investor at a certain price. Conversely, selling or writing a call or put option is a short position; the writer must sell to or buy from the long position holder or buyer of the option.
What is long call and short call option?
Long call: A long call is a buyer's bullish bet on the price of a security. Short call: A short call is a seller's bearish bet on the price of a security.