Series 7 practice questionmediumOptions — Straddle Maximum Loss
What is the maximum loss for a long straddle?
- AUnlimited
- BThe call premium only
- CThe total of both premiums paid✓ Correct answer
- DThe strike price minus the total premiums
Explanation
Why C — The total of both premiums paid
The maximum loss for a long straddle is the total of both premiums paid (call premium + put premium). This occurs when the stock price equals the strike price at expiration, causing both options to expire worthless. The investor loses the entire investment in both options.
Turn it into reps
Reading one answer is not the same as being ready
Lucky the Banker is a free practice app with 758+ Series 7 questions, weak-area tracking, and timed mock exams. No credit card, no paywall.
Spot an error in this question or explanation? Tell us — we fix these fast.
Related Investment Information & Recommendations questions
- An investor buys 1 RST Feb 40 call at $3 and buys 1 RST Feb 35 put at $2. At expiration, RST is at $30. What is the…
- An investor buys a put with a higher strike price and writes a put with a lower strike price, both with the same…
- What is the primary difference between a covered call and an uncovered call?
- The OCC's exercise-by-exception rule automatically exercises options that expire in-the-money by at least:
- Which of the following options positions requires a margin account?
- An investor who writes a deep in-the-money covered call on stock held for 10 months may face which tax consequence?
- Which two options positions are on the same side of the market (bearish)?
- An investor writes 5 covered ABC Jul 50 calls at $3 each. The stock was purchased at $47. At expiration, ABC is at $55…