You Are Considering Two Option Contracts with the Same Strike

question 17

Multiple Choice

You are considering two option contracts with the same strike price. Ignoring costs, which one of the following combinations will increase the value of a firm if prices move either up or down?

• A) Buying both a call and a put.
• B) Both buying and selling a call.
• C) Buying a call and selling a put.
• D) Buying a put and selling a call.
• E) Both selling a put and a call.

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Definitions:

Phylum

A rank in the biological classification system, or taxonomy, that is below Kingdom and above Class, grouping organisms based on a shared body plan or other major characteristics.

Phylum

A classification level in the biological taxonomy that ranks above class and below kingdom, used to group organisms that share a common basic structure.

Piagetian Perspective

A theory of cognitive development proposed by Jean Piaget that describes how children construct knowledge through interactions with their environment, emphasizing stages of development.

Accommodation

Piagetian concept of adjusting schemes to fit new information and experiences.