Chapter 02 · Section 2.1
Long DM Puts-2
Lara is long 4 PHLX DM June 45 puts. Which statement is true?
b) Lara has practically unlimited loss and limited profit potential.
No. Lara is long an option, thus the owner of an option. The option gives her the right to decide whether to exercise, the most she can lose is the premium which she paid.
a) Lara has limited loss and practically unlimited profit potential.