Question

A customer establishes the following positions: Buy 100 JMB at 28. Buy 1 JMB Dec 25 put at 2. What is the maximum potential loss? A) 3000. B) 200. C) 2800.

Answer 1

The Answer should be None of the given Options.

Step-by-step explanation:

In this Case, the investor has lost money on the long stock position when the market value falls.

The investor can sell the stock for no less than the strike price by purchasing the put, but he also loses the premium. i.e $2

In this Question, the investor loses a maximum of $3 on the stock (28 − 25) plus the premium of $2, for a total loss of $500 on 100 shares.

Hence the correct answer is $500 i.e None of the Given options