
Explanation:
Compare the maximum possible profit of each position:
Thus the order from lowest to highest maximum profit is:
Short put < short forward < long forward
So the correct answer is D.
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136.4 Consider three positions on the same underlying asset: 1. Long forward (forward price at current spot price), 2. Short forward (forward price at current spot price), and 3. Short put option (strike price at current spot price). Which sequence, from lowest potential to highest, describes their MAXIMUM PROFIT potential?
A
Long forward < short forward < short put
B
Short forward < short put < long forward
C
Short put < long forward < short forward
D
Short put < short forward < long forward