Series 7 - General Securities Representative Exam

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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

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