Question

You bought a put option with a strike price of $52.50. The underlying asset is trading for $60.55 and you paid a premium of $1.10. What is the most you could lose from this strategy?

Answer 1

  

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The option has right to exercise the option and not any obligation i.e. if the trade does not go the favour of he buyer, then he can let the option lapse. and incurr a loss of only the Premium paid.

Max loss for a option buyer is premium paid = $1.10

Toal Loss could be = 1.10 * 100 = 110

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