SIE practice questionmediumPut options
An investor sells an uncovered (naked) put. What is the maximum potential loss?
- AStrike price minus zero, per share
- BStrike price minus premium received, per share✓ Correct answer
- CUnlimited
- DPremium received
Explanation
Why B — Strike price minus premium received, per share
For an uncovered put writer, the maximum loss occurs if the stock falls to zero: strike price minus the premium received, per share. Put-writer loss is large but not unlimited.
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