Question

A put on Sanders stock with a strike price of $31 is priced at $2 per share, while a call with a strike price of $31 is priced at $2.50. The maximum per-share loss to the writer of an uncovered put is __________, and the maximum per-share gain to the writer of an uncovered call is _________.

Answer 1

Answer: $29; $2.50

Explanation:

The maximum per share loss to the writer of an uncovered put; that is price of put is zero on expiration

Strike price = $31, at $2 per share

Therefore, maximum per share loss ;

($31 - 0) - $2 =

Maximum per share gain to the writer of an uncovered put occurs when the stock price falls below $31 on expiration.

Maximum per share gain equals $2.50