Question

You believe that stock XYZ will go down substantially in value over the next 30 days....

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

Homework Answers

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

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