Which of the following investors would be happy to see the stock price rise sharply?
I.An investor who owns the stock and a put option;
II.An investor who has sold a put option and bought a call option;
III.correct for projects that have average risk compared to the firm's other assets. An investor who owns the stock and has sold a call option
IV.An investor who has sold a call option
A)I and II only
B)III and IV only
C)III only
D)IV only

Question

Quizplus · Accepted Answer

I. An investor who owns the stock benefits from a price increase. Owning a put option doesn't change the benefit of the stock price rising, as the option would simply become less valuable or expire worthless, but the gain on the stock outweighs this.II. An investor who has sold a put option benefits from the stock price rising because the option is less likely to be exercised, leading to profit. Buying a call option also benefits from a stock price increase, making this combination favorable.

Which of the Following Investors Would Be Happy to See