Chapter 02 · Section 2.1

Long DM Puts-2

Lara is long 4 PHLX DM June 45 puts. Which statement is true?

• a) Lara has limited loss and practically unlimited profit potential.
  Yes. Because Lara has the choice if she wants to sell Deutsche Marks at $.45/DM or not, she has practically unlimited profit potential, depending on the $/DM rate. The most she can lose is the premium she paid for the options. Continue
  b) Lara has practically unlimited loss and limited profit potential.