Suppose You Purchase a Call and Write a Put on the Same

question 54

Multiple Choice

Suppose you purchase a call and write a put on the same stock with the same exercise price and expiration. If prices are at equilibrium, the value of this portfolio is ________.

• A) S₀ − Xe^−rt
• B) S₀ − X
• C) S₀ + Xe^−rt
• D) S₀ + X

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Definitions:

Transactions in Goods

Commercial exchanges involving the sale and purchase of physical products, as opposed to services or digital goods.

UCC

The Uniform Commercial Code, a comprehensive set of laws governing all commercial transactions in the United States, intended to standardize and simplify the laws across the states.

Ex-Ship

A term used in international trade, indicating that the seller is responsible for delivering goods to a designated port of arrival and covering all costs until the goods are offloaded from the ship.

Risk of Loss

A legal term referring to who bears the financial burden if goods are damaged or lost during a transaction or shipment.