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rohan_patil

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  • in reply to: Question about options and risk #85879
    Avatar of rohan_patilrohan_patil
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      03 Feb 2021 at 3:59 am
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      In the question it is mentioned following:

      Buy Call – This is Unlimited Profit on long side with limited loss on down sidePut Write – This has Limited Profit on long side but Unlimited loss on down side.

      As per the question it is asked that where is Robert’s risk Exposure. Accordning to the above situation it is certain that Robert shall have unlimited Risk on Down Side i.e if stock price will fall considerably then he will have unlimited risk. Means he shall exposed to unlimited risk on down side. However if stock price shall go up then he shall have unlimited profit.

      Question has asked that Robert’s exposure to the risk of the stock . It is tricky how to interpret question. According to me, question is asking that out of two open positions of Robert, which position shall give him maximum exposure to risk… either short put or long call.

      Short put shall give maximum loss means maximum exposure to risk.

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