Final answer:
In options trading, a long straddle has a risk equal to the premiums paid; a short straddle has unlimited risk; a long spread's risk is equal to the debit paid; and a short spread's loss is the difference between strike prices minus the credit received.
Step-by-step explanation:
The strategies mentioned are all options trading strategies, each with its respective risk of loss. Here is the matching of these strategies with their risk of loss:
- Long straddle: Loss = Premiums paid (A).
- Short straddle: Unlimited loss (D).
- Long spread: Loss = Debit (B).
- Short spread: Loss = Difference between strike and credit (C).
A long straddle involves buying both a call and a put at the same strike price and expiration date, and the maximum loss is limited to the total premiums paid for both options. A short straddle consists of selling a call and a put with the same strike price and expiration, with potential for unlimited loss if the market moves significantly in either direction.
A long spread, also known as a debit spread, involves purchasing options at one strike price and selling options at another, with the loss limited to the initial debit. Conversely, a short spread, or credit spread, entails selling options at one strike price and buying options at another, with the maximum loss being the difference between the strike prices minus the credit received.