If You Are Short a Call and Long an Otherwise

question 12

Multiple Choice

If you are short a call and long an otherwise identical put on the same stock,where the strike price is the forward price of the stock for the same maturity as the options,you essentially have the following position:

• A)A short forward on the stock for the maturity of the option.
• B)A synthetic collar.
• C)An options position for which you pay a positive net premium up front.
• D)An options position for which you receive a net premium up front.

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Definitions:

Cost of Goods Sold

The immediate expenses linked to the creation of products sold by a firm, encompassing materials, workforce, and indirect costs.

Periodic Inventory System

A method of inventory valuation for financial reporting purposes where a physical count of the inventory is taken at specified intervals.

Purchase Account

An account used in accounting to record the total purchases of goods and services by a company.

Inventory Account

An account used to record the value of inventory held by a company, including raw materials, work-in-progress, and finished goods.