A synthetic short put position can be created with which of the following sets of transactions.

A synthetic short put position can be created with which of the following sets of transactions.

a. borrow the present value of the strike price, sell stock, sell call
b. lend the present value of the strike price, sell stock, buy call
c. sell call, buy stock, lend the present value of the strike price
d. buy stock, buy call, borrow the present value of the strike price
e. none of the above creates a synthetic long call position







Answer: C

A synthetic long call position can be created with which of the following sets of transactions.

A synthetic long call position can be created with which of the following sets of transactions.

a. borrow the present value of the strike price, sell stock, sell put
b. lend the present value of the strike price, sell stock, buy put
c. sell put, buy stock, lend the present value of the strike price
d. buy stock, buy put, borrow the present value of the strike price
e. none of the above creates a synthetic long call position

Answer: B

Identify the correct statement related to the choice of exercise price for buying a call.

Identify the correct statement related to the choice of exercise price for buying a call.

a. the higher the exercise price the higher the call premium
b. the lower the exercise price the more likely the call option will expire out-of-the-money
c. A higher strike price results in smaller gains on the upside but smaller losses on the downside
d. the higher the exercise price the more dividends contribute to the overall profit
e. none of the above are correct statements related to the choice of exercise price for buying a call

Answer: C

Which of the following statements about a covered call writing strategy is true?

Which of the following statements about a covered call writing strategy is true?

a. the losses are limited
b. return and risk are greater than that of simply holding the stock
c. it is a cheaper form of insurance than a protective put
d. it generally makes a large number of small profits
e. none of the above





Answer: D