Which of the Following Strategies Makes a Profit When the Stock

question 69

Multiple Choice

Which of the following strategies makes a profit when the stock price declines and loses money when the stock price increases?

• A) long call and short put
• B) long call and long put
• C) short call and short put
• D) short call and long put

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Definitions:

Earnings Before Taxes

A company's profitability measure calculated by subtracting all expenses, except taxes, from revenues.

Earnings Per Share

A company's profit divided by its number of outstanding shares of common stock.

Convertible Bond

A type of bond that allows bondholders the option to convert their debt into a predetermined number of shares of the issuing company.

Call Price

The price at which a bond or other financial security can be repurchased by the issuer before its maturity date, often higher than the face value to compensate investors.