Long and Short Positions

What this video covers

• The maximum gain and maximum loss formula for a long position, and why the loss floor is exactly the purchase price
• How a short position reverses the gain-loss profile, with maximum gain capped at the sale price and maximum loss unlimited
• Why short selling requires a margin account rather than a cash account, since borrowing shares from a broker-dealer needs a margin agreement in place
• The five-step short-selling playbook from borrowing through covering, and where profit equals the spread between sale price and buyback price
• The critical exam distinction between covered positions (underlying security owned, risk limited) and naked or uncovered positions (no underlying owned, risk potentially unlimited)
• Why a covered call writer delivers shares already owned, while a naked call writer must buy at market price with no ceiling on cost