hi
Writing a Call option is just opposite to buying a call option. In buying a call option maximum loss with be option premium, but maximum gain is unlimited.
On the opposite way, in writing a call option, maximum gain is limited only till the option premium and maximum loss can be anything.
Hence above statement is wrong.
Thanks
Q2. The maximum loss from writing a call option is limited but the maximum gain is...
The maximum possible gain of a long position in call option is __________, and the maximum possible gain of a short position in put option is __________. Multiple Choice exercise price - stock price, premium stock price - exercise price, unlimited unlimited, exercise price - stock price unlimited, premium
The maximum possible gain of a long position in call option is __________, and the maximum possible gain of a short position in put option is __________. Multiple Choice A) stock price - exercise price, unlimited B) exercise price - stock price, premium C) unlimited, exercise price - stock price D) unlimited, premium
What are the maximum gain and maximum loss to a trader that buys a put option?
Question 2 (1 point) Saved The potential loss for writing a short (or naked) call option in infinite. True False
Question 1 (1 point) The maximum loss for writing a put option is infinity. True False
Although the potential loss incurred from purchasing a call option is finite, the potential loss to the seller is unbounded. Explain why the potential loss that the seller may incur is unbounded.
• Profit/loss for buyers/sellers of call option/put option Breakeven for call option/put option An investor bought 1 XYZ March 30 call for 3. o What is the breakeven point? 3043-33 o What is the initial investment of this strategy? 300 o What is the profit/loss if XYZ trades for 25 at expiration? o What is the profit/loss if XYZ trades for 35 at expiration? o What is the max. profit? P *LP o What is the max. loss? Premium
1. Elementary Option Trading Strategies (Covered call writing and Floors) Suppose an investor owns 100,000 shares of IBM stock at $120 per share. If the investor expects no large price rise and possible drop in price, he or she) sells 100,000 December 125 call option at $7, receiving $700,000. a. (5 points) If IBM stock drops only slightly from $120 to $113, what is the profit associated with the covered call writing strategy? b. (5 points) If IBM stock rises...
JBLU is trading at $22/share. The AUG Call X = 20 is trading at $3.25. Answer the following: a)What is the time value of this option? b)What is the intrinsic value of this option? c)Maximum loss to the holder? d)Maximum loss to the writer? e)If you write 1 call option on JBLU AUG Call X = 20 for $2.25. At expiration, the stock is trading at $27 and you are exercised. What is your gain or loss? What if the...
12. (2 points) A call option on Brocklehurst Corp. has an exercise price of $30. The current stock price of Brocklehurst Corp. is $32. The call option is a. at the money b. in the money c. out of the money d. knocked in 13. (3 points) You purchase one MBI March 120 put contract (equaling 100 shares) for a put premium of 510. The maximum profit that you could gain from this strategy is 2. S120 b. $1,000 c....