Short Put: Understanding Maximum Loss

What is the maximum loss for an investor who is short 1 December 15 put at 6?

Based on the Put and the short, the investor's maximum loss is b) $900.

When using puts, the maximum loss incurred on the put's price is 15.

In this case, the Put has a premium of 6 which means that the put is limited to:

= Maximum loss - premium on put

= 15 - 6

= $9

The number of shares in a typical put contract is 100 so the maximum loss is:

= Loss per put x Number of shares

= 9 x 100

= $900

In conclusion, the maximum loss for the investor on the short position is $900.