Question

You believe that stock XYZ will go down substantially in value over the next 30 days. Which of the following options trading strategies could you use?

1. Buy a JAN 25 Call for $2.
2. Write a JAN 25 Call for $2.
3. Buy a JAN 25 Put for $2.
4. Write a JAN 25 Put for $2.

1. II and III only
2. I only
3. I and IV only
4. I, II, III and IV

Answer 1

If one believes that stock in going to fall, he will make a bearish position through Buying of put option, selling of call options and short selling the stock in future markets.

So if I believe that stick xyz will go down in value in 30 days ,

I'll write a Jan 25 call and Buy a Jan 25 put as both are indicative of a bearish position.

Buying a call and writing a put is a bullish strategy hence they are not applicable in this case.

So the correct answer will be ( II )AND( III)

The correct option would be (A) II AND III ONLY