Series 7 - General Securities Representative Exam
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Maxwell sold a straddle on ABC corp and collected a premium of 17.00. What is his maximum risk on this trade?
17.00
A
Unlimited
B
Strike prices added together minus 17.00
C
Strike prices subtracted from one another plus 17.00
D
Explanations
Maxwell sold a call and a put at the same strike price and collected 17.00. Since these are naked options, and since he has sold a call, his maximum risk is unlimited.