You Purchase a Call Option and a Put Option on the Shares

question 45

Multiple Choice

You purchase a call option and a put option on the shares of a company.The sticker price and expiration date for the options is equal.What is the best description of the combined payoff diagram for the combination of the two options?

• A) an upward sloping straight line
• B) a downward sloping straight line
• C) a v-shaped diagram with the kink at the strike price of the options
• D) an upside down v-shaped diagram with the kink at the strike price of the options

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Definitions:

Stock Investments

Financial assets representing ownership in companies, which may yield dividends and have the potential for capital appreciation.

Imports Inventory

Imports inventory refers to goods and materials purchased from other countries for resale or use in production.

Year-End Adjustments

Accounting entries made at the end of an accounting period to update accounts for accurate financial reporting.

Ownership

The legal right to possess, use, and control a property or an asset.