If You Were to Purchase an October Option with an Exercise

question 95

Multiple Choice

If you were to purchase an October option with an exercise price of 50 for $8 and simultaneously sell an October option with an exercise price of 60 for $2, you would be

• A) bullish and taking a high risk.
• B) bullish and conservative.
• C) bearish and taking a high risk.
• D) bearish and conservative.
• E) neutral.

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Definitions:

Marginal Cost

The price of manufacturing an incremental unit of a product.

Perfectly Competitive Market

A market structure characterized by an infinite number of buyers and sellers, identical products, no barriers to entry or exit, and perfect information among all participants.

Short-run Industry

A period in which at least one factor of production is fixed, and firms can only partially adjust their production levels.

Game-day T-shirts

Merchandise specifically designed and sold for sporting events, often featuring team logos or slogans to support the team.