Suppose You Both Short a Call Option and Long a Put

question 12

Multiple Choice

Suppose you both short a call option and long a put option.Both these European options are on the same underlying stock and have the same strike price and expiration date.You have created a:

• A) short forward
• B) long forward
• C) long option
• D) long stock
• E) None of these answers are correct.

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Definitions:

Prepaid Expenses

Future expenses that have been paid in advance and are accounted for as assets on a balance sheet until they are incurred.

Accrual Basis

An accounting method that records revenues and expenses when they are earned or incurred, regardless of when the cash is actually exchanged.

Accounts Receivable

Amounts due to a company from its clients for the supply of goods or services, which have yet to be paid for.

Accounts Payable

The amount of money a company owes to its creditors for goods or services purchased on credit.