An Investor Purchased Both a Put and a Call Option

question 29

Multiple Choice

An investor purchased both a put and a call option on a stock with exercise prices of $40 a share. The put cost $1 and the call cost $3. When the options expire the stock price is $43. What is the investor's net profit?

• A) -$1
• B) $0
• C) $3
• D)$2

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Definitions:

Spontaneous Recovery

Following a period without exposure to the conditioned stimulus, a conditioned response that had previously disappeared resurfaces.

Shaping

A process in behavioral psychology that involves reinforcing behaviors that are successively closer to the desired action.

Stimulus Generalization

The tendency for the conditioned response to be evoked by stimuli that are similar to the stimulus to which the response was conditioned.

Stimulus Discrimination

The ability to differentiate between similar stimuli and respond appropriately to each.