Question

You buy one Home Depot June 60 call contract and one June 60 put contract. The call premium is $5 and the put premium is $3. Your maximum loss from this position could be a. $300. b. $800. c. None of the options are correct. d. $200. $500.

Answer 1

b. $800

Step-by-step explanation:

The calculation of maximum loss from this position is shown below:-

Maximum Loss from this position = (Assume figure × Call premium) + (Assume figure × Put premium)

= (100 × $5) + (100 × $3)

= $500 + $300

= $800

Therefore for computing the maximum loss from this position we simply applied the above formula.