Consider the Following Compound Options Written on an Underlying Stock

question 27

Multiple Choice

Consider the following compound options written on an underlying stock.Which one decreases in value when the stock falls in price?

• A)A put on a call.
• B)A call on a put.
• C)A put on a put.
• D)None of the above.

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Definitions:

Cash

A form of liquid asset that consists of currency, including coins and banknotes, which can be used immediately for transactions.

Supplies Expense

The cost associated with consumable supplies used during an accounting period in the operation of a business.

Supplies

Items used in the day-to-day operations of a business, such as office supplies, which are essential for conducting business activities.

Inventory

The cumulative inventory of products and materials retained by a business for selling or for use in manufacturing.