Series VIIIEasyOptions Contracts

The maximum loss for the buyer of a put option is:

AUnlimited
BLimited to the premium paidcheck_circle
CEqual to the strike price
DEqual to the spot price minus the strike price

Correct answer

B. Limited to the premium paid

lightbulbDetailed Solution

An option buyer can never lose more than the premium paid, because exercising is a right, not an obligation. If the put finishes out-of-the-money the buyer simply lets it lapse. The buyer profits as the underlying falls below the strike (less premium).

Reference: NISM Series VIII Equity Derivatives, Chapter 3.

Practice more Series VIII questions

Timed mocks and adaptive practice — free.

Start Practising Free

More from Series VIII

See all Series VIII questionsarrow_forward

Keep going

One answered question is a start. These hubs cover the rest of the syllabus.

timerFree Mock Quizarrow_forwardA timed quiz you can take right now in the browser — no sign-up, instant score.menu_bookStudy Notesarrow_forwardChapter-by-chapter explainers written to be read in five minutes, not five hours.translateFinance Glossaryarrow_forwardEvery SEBI and markets term you'll meet in the syllabus, defined in plain English.routeLearning Pathwaysarrow_forwardGuided routes into real roles — Research Analyst, Mutual Fund Distributor and more.grid_viewAll 26 NISM Seriesarrow_forwardBrowse every certification, its syllabus and who each one is actually for.descriptionThe NISM Guidearrow_forwardRegistration, fees, pass marks and exam-day logistics, start to finish.