n NISM Certifications
X NISM Series X
Medium

What is the maximum profit one can make from a short position in a 'Put Option'?

Practice question from NISM Series XA- Investment Adviser (Level 1) Mock Test 6 — bank. The correct answer is highlighted below with a full explanation.

Options

  1. A

    Unlimited profit only if shares go up

  2. B

    Unlimited profit only if shares go down

  3. C

    Unlimited profit in a flat market

  4. Only the option premium

    Correct answer

Why this is the answer

The maximum profit from a short put is the premium received; losses are theoretically unlimited if the stock price drops.

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