Chapter 02 · Section 2.1

Potential Profits and Losses

Which of the following positions imply an unlimited or practically unlimited profit potential and limited risk of loss?

a) Long call
b) Long put
c) Short call
• d) Short put
  No. If you are "short a put" you are the writer of a put and have an obligation, not the right, to buy. Thus you have practically unlimited risk of loss and a profit potential limited to the premium you received for writing the option.
  e) a and b
  f) a and c

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