Products & RisksQuestion 35 of 125
Using the same spread (buy 1 XYZ 50 call for 5, sell 1 XYZ 60 call for 2), what is the maximum loss?
a.$700
b.Unlimited
c.$300
d.$1,000
Explanation
The maximum loss on a debit spread is the net premium paid. Here the net debit is 3 points (5 - 2), or $300, which is lost if both calls expire worthless with the stock at or below 50.
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