Which of the following can be used to create a long position in a European put option on a stock?
A) Buy a call option on the stock and buy the stock
B) Buy a call on the stock and short the stock
C) Sell a call option on the stock and buy the stock
D) Sell a call option on the stock and sell the stock

Question

Quizplus · Accepted Answer

As payoff diagrams show a call on a stock combined with a short position in the stock gives a payoff similar to a put option.Alternatively we can use put-call parity,which shows that a call minus the stock equals the put minus the present value of the strike price.

Which of the Following Can Be Used to Create a Long