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Murljashka [212]
3 years ago
13

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

hint:draw graphs and combine them) A. Long call and short put B. Long call and long put C. Short call and short put D. Short call and long put
Business
1 answer:
SIZIF [17.4K]3 years ago
4 0

Answer:

Option D is correct option.

<u>Short call and long put</u>

Explanation:

Short call and long put = - max (S - K, 0) + max (K - S, 0);

As S declines, the payoff from long put position improves. As S increases, payoff from short call position loses money. This option satisfies the condition put in the question.

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