Series 7 - General Securities Representative Exam
Preview Mode
A trader sells a straddle for 18.00. What is his maximum loss?
Call Price minus Put Price
A
$900
B
$1,800
C
Unlimited
D
Explanations
The maximum loss when selling a straddle is unlimited. It involves selling an at the money call and at the money put. Since the price of a stock can theoretically rise to infinity; there is an unlimited maximum loss