If you combine a long stock position with selling an at-the-money call option, the resulting net payoff profile will resemble the payoff profile of a _______.
A. long call
B. short call
C. short put
D. long put

Question

19-12-2022
Computers and Technology

Answered

If you combine a long stock position with selling an at-the-money call option, the resulting net payoff profile will resemble the payoff profile of a _______.
A. long call
B. short call
C. short put
D. long put

Answer :

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rk16 rk16 · Answer 1 · 2022-12-22T09:05:42-05:00

If you combine a long stock position with selling an at-the-money call option, the resulting net payoff profile will resemble the payoff profile of a short put.

Long stock position it mean you currently own the stock with the expectation the stock price will rise in the future so you can get profit.

At-the-money or ATM is when you call or put in very near or at exactly to the market price currently.

Short put is when you want to sell the stock for specified price in higher price than current market price to get profit.

The term to keep in mind is, call for buying and put for selling, since the question is ask for selling so the answer is short. Then, the since the position is now long then the selling position is in short.

Thus, the correct answer is short put.

Learn more about long position here:

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If you combine a long stock position with selling an at-the-money call option, the resulting net payoff profile will resemble the payoff profile of a _______. A. long call B. short call C. short put D. long put

Answer :

Other Questions

If you combine a long stock position with selling an at-the-money call option, the resulting net payoff profile will resemble the payoff profile of a _______.
A. long call
B. short call
C. short put
D. long put