Question

You buy one Huge-Packing August 50 call contract and one Huge-Packing August 50 put contract. The call premium is $1.70, and the put premium is $4.95. Your highest potential loss from this position is

Answer 1

Answer:

$665

Explanation:

Call premium is $1.70

Put premium is $4.95

If you buy call contract and put contract, the highest loss you can incur is the premium paid for the call option and put option.

Normally, every option contain 100 shares. So, the highest potential loss from this situation is as follows:

= 100 * [$1.70 + $4.95]

= 100 * $6.65

= $665

So, your highest potential loss from this position is $665.