Chapter 02 · Section 2.1

Long put position

a b
c d

You have just seen the profit/loss diagram for a long call position. Which one of the diagrams above represents a long put position?

a)
b)
• c)
  No. Look at the right hand side of graph (c): the red line slopes downward, representing an unlimited loss potential for a rise in the price of the underlying asset. For a long put, that loss is limited.
  d)

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