Max Loss
The maximum amount a position can lose under its payoff structure.
Explanation
For defined-risk strategies, max loss is known at entry and is essential for sizing. For undefined-risk structures, max loss can be very large or theoretically unlimited (for example, short naked calls). Accurate max-loss estimation should include contract multiplier and fees.
Example
A $5-wide credit spread entered for $1.40 credit has max loss of $3.60 per share, or $360 per contract.