You Own a Call Option and Put Option That Both

question 92

Multiple Choice

You own a call option and put option that both have the same exercise price of $50, and their respective prices are $4 and $3. The stock is currently trading at $60. Calculate the dollar return on this strategy.

• A) $1.00
• B) $2.00
• C) $3.00
• D) $4.00
• E) $5.00

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Definitions:

Behavioral Economics

A field of economics that studies how psychological, emotional, cognitive, and social factors affect economic decisions.

Stock Shares

Units of ownership interest in a corporation or financial asset, representing a portion of the company's equity.

Endowment Effect

Refers to the phenomenon where people ascribe more value to things merely because they own them.

Ultimatum Game

A game in experimental economics where two players decide on how to divide a sum of money; one proposes the split, and the other can accept or reject it.