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SIE: Options
SIE practice questionmediumMax gain/loss

What is the maximum gain for a written (short) put option?

  1. AUnlimited
  2. BThe premium received✓ Correct answer
  3. CMarket price of the underlying
  4. DDifference between stock price and strike price
Explanation

Why BThe premium received

The most a put writer can gain is the premium collected up front. Their risk is substantial if the stock price falls, but their gain does not grow beyond the premium.

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