Chapter 06 · Section 6.1

Potential Profits or Losses

In a box or conversion/reversal, you are basically long and short the underlying at a price differential, which approximately is equal to your potential profit or loss. Please answer with true or false.

• a) false
  No. This position is constructed by using synthetic long or short underlying positions against either the opposite synthetic or the opposite underlying position. The price differential is your profit or loss.
  b) true