Products & Their RisksQuestion 95 of 398
What is the maximum gain for the writer of a put option?
a.Unlimited
b.The strike price times 100
c.The premium received
d.The difference between strike and zero
Explanation
A put writer's maximum gain is the premium received, realized when the put expires out-of-the-money (the stock stays at or above the strike). The writer's risk, however, is substantial: if the stock falls to zero, the loss equals the strike price minus the premium, times the contract size.
Practice all 398 questions free — no signup required.
Related questions on this topic
- An investor owns 100 shares of a stock and sells one call option against those shares. This strategy is:
- An investor holds a long stock position and buys a put on that stock to limit downside risk. This is known as:
- What is the maximum loss for the buyer of a call option?
- An investor buys one XYZ call with a $30 strike for a $2 premium. At expiration XYZ trades at $35 and the investor exercises. Ignoring commissions, what is the investor's net profit per share?
- A general obligation (GO) municipal bond is backed primarily by:
- A revenue bond is distinguished from a general obligation bond because a revenue bond is repaid from:
Last reviewed: · editorial process
PrepPass Editorial Team · Verified against FINRA Securities Industry Essentials (SIE) Exam · How we review