Pierre-Louis Robert just purchased a call option on shares of the Michelin Group. A few days ago he wrote a put option on Michelin shares. The call and put options have the same exercise price, expiration date, and number of shares underlying.

The exposure as a result of the long call position is long. The exposure as a result of the short put position is also long. Therefore, the combined exposure is long. So, the combined exposure is short. Could anyone kindly explain where I went wrong? Two diagrams I used for my reasoning numbers not relevant: What is the reasoning that the risk exposure for a long call is long?

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What would the reasoning for the risk exposure for a short put being long be? If so, then I would have mixed up the definitions, in that I thought the potential loss is where the risk would be ……. You want the price to go up if you purchase a call option or write a put option.

Financial Exam Help This may seem like a simple question, but could someone explain why long call and short put has increased risk?

Risk is typically defined as uncertainty that affects future outcomes. Thank you for reminding me about that! An example of reducing risk being short risk is buying a protective put when you have an existing long position in the underlying: Selling a covered call when you have an existing long position in the underlying is another example of being short risk: Okay, thank you for your explanation.

Are you talking about a different type of risk with the CFAI text? All of these positions are long risk i. AnalystForum is an online community designed exclusively for CFA candidates and charterholders to discuss the Chartered Financial Analyst program.

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CFA Level II Candidate 90 AF Points. CFA Level I Candidate 17 AF Points. I am confused on this too. Derivatives are very confusing: Smagician Aug 11th, Boardmember, Forum Editor CFA Charterholder 18, AF Points.

Managing Risk with Options Strategies: Long and Short Call and Put Positions

Simplify the complicated side; don't complify the simplicated side. There is risk in a long call: There is risk in a short put: Potential losses are unknown Long Put: Potential profit are unknown. Smagician Aug 11th, 1: Yes, those positions have risk as well.

Smagician Aug 11th, 2: Smagician Aug 11th, 6: Smagician Aug 12th, Glad to have been of help. This Post Is Filed Under: Market Organization, Market Indices, and Market Efficiency. Fitch Learning - Toronto - Top 10 Common Pitfalls to Avoid - FREE EVENT. About AnalystForum AnalystForum is an online community designed exclusively for CFA candidates and charterholders to discuss the Chartered Financial Analyst program.