Suppose You Are Short a Call and Long a Put

question 19

Multiple Choice

Suppose you are short a call and long a put on the S&P 500 index with the same strike and same maturity. Then, you are essentially holding

• A) A long forward on the S&P 500 index
• B) A long straddle on the S&P 500 index
• C) A short forward on the S&P 500 index
• D) A short straddle on the S&P 500 index

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Definitions:

T-account

A graphical representation of a general ledger account that outlines the effects of transactions on account balances.

Debit

An accounting entry that results in either an increase in assets or a decrease in liabilities on a company's balance sheet.

Credit

A financial agreement where a borrower receives something of value now and agrees to repay the lender at a later date, often with interest.

Equity Account

An account representing the owner's or shareholders' interest in a company, reflected in the capital stock, retained earnings, and contributed surplus on the balance sheet.