Question
Suppose that you sell short 100 shares, now selling at $70 per share.
What is your maximum possible loss?
What happens to the maximum loss if you simultaneously place a stop buy order at $78?
What is your maximum possible loss?
What happens to the maximum loss if you simultaneously place a stop buy order at $78?
Answers
RIO
The Max possible loss will be increasingly unbounded if P --> infinite.
If you simultaneously place a stop-buy order at $78, the maximum possible loss per share is $8.
If you simultaneously place a stop-buy order at $78, the maximum possible loss per share is $8.