A put writer would be "covered" by: (A) A long call (B) Another short put (C) Cash equal to the strike price multiplied by 100 shares (D) An escrow receipt for 100 shares of the underlying stock

Question

Abdullah Walter

Business

27 January, 12:40

A put writer would be "covered" by: (A) A long call (B) Another short put (C) Cash equal to the strike price multiplied by 100 shares (D) An escrow receipt for 100 shares of the underlying stock

+1

Answers (1)

Know the Answer?

Jasper Dillon · Answer 1

Cash equal to the strike price multiplied by 100 shares

Answer: Option C.

Explanation:

A covered put choice is an alternative to sell where the essayist (short) has adequate money on store, has long identical put, or has a bank ensure letter to "spread" the put whenever practiced by the holder.

A put choice gives the holder the privilege however not the commitment to sell the offers at a predefined cost during the life of the choice. Recorded as a hard copy or shorting a put choice, the merchant (essayist) of the put choice gives the privilege to the purchaser (holder) to sell a benefit by a specific date at a specific cost.