Question

*A trader sells a put option with a strike price of $40 for
$5. What is the trader's maximum gain and maximum loss? How does
your answer change if it is a call option?*

Answer #1

**Answer:**

When a trader sells a put option the maximum gain/loss is QUANTIFIABLE. Meaning to say it can be calculated at any given point in time till either the expiry of the option or the exercise. In case of a call option the maximum gain can be calculated at any given time but NOT the maximum loss.

The
trader’s maximum gain from the * put* option is

The
maximum loss is **$35**, corresponding to the
situation where the option is exercised and the asset price is
zero.

If the
option were a ** call**, the trader’s maximum gain
would still be

*[Kindly give a positive
rating if you are satisfied with the answer. Feel free to ask if
you have any doubt. Thanks.]*

A trader conducts a trading strategy by selling a call option
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loss, and break-even point. Hint: Write down a profit
analysis matrix to help you draw the payoff lines.

1. A trader buys a call option with a strike price of €45 and a
put option with a strike price of €40. Both options have the same
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Explain the purpose of this strategy

The price of a stock is $75. A trader sells 6 put option
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of $78 when the option price is $5. The options are exercised when
the stock price is $74. What is the trader’s net profit or
loss?
Solve in following 4 steps.
a) Option profit ?
b) Trader’s gain per option ?
c) Total options sold ?
d) Trader’s total gain ?

The price of a stock (S0) is $75. A trader sells 6 (N) put
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net profit or loss?
Solve in following 4 steps.
a) Option profit ?
b) Trader’s gain per option ?
c) Total options sold ?
d) Trader’s total gain...

Consider a trader who buys a put option on Sterling pounds at a
strike price of $ 1.4700, for a premium of
$ 0.02. If exchange rates are
1.4378, 1.4458,
1.4500, 1.4682 and
1.4725. Calculate the gain or loss and state
whether he will exercise the option or not.
(Please provide detailed answer)

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Price of a call option $

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stock and long 3 contracts of the put options with strike price of
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Long 1 share of stock.
(Option contracts are for 1 share).
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A trader has the following portfolio:
1. Long 1-year put with strike $80
2. Short 1-year call with strike $120
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Assume that the price of the underlying asset is $100.
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