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
e) a and b
• f) a and c
  No. (a) is correct, (c) is wrong. The fact that you have a call position does not necessarily mean that you have limited risk of loss. It depends upon whether you are the holder or the writer of a call.

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