Chapter 05 · Section 5.1
Maximum Loss
Suppose that the current index value is 450 and that this is exactly the amount you paid when you bought your stock portfolio.
You have bought a put (contract size: 1 x index) with a strike of 440 at 7.50. You can see that your potential loss is limited.
What is your maximum loss?
a) 17.30
b) 20
c) 18.30
d) 450
The maximum loss can be calculated in the case of index = put strike price (index = 440).