SIE practice questionhardStraddles
A trader sells a straddle. What is their maximum potential loss?
- AUnlimited✓ Correct answer
- BTotal premium received
- CDifference in strike prices
- DThere is no risk of loss
Explanation
Why A — Unlimited
Selling a straddle involves unlimited risk if the stock moves sharply in either direction. The other options underestimate the risk.
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