Steve has an option with a payoff profile that depicts a line that is constant at zero up until some point after which the line slopes downward. What type of action did Steve take to obtain this profile?
A) Purchased a call option
B) Purchased a put option
C) Sold a call option
D) Sold a put option
E) Purchased and simultaneously sold the same call option

Question

Quizplus · Accepted Answer

Selling a call option results in a payoff profile that is zero until the strike price is reached, after which the payoff becomes negative as the stock price increases beyond the strike price.

Steve Has an Option with a Payoff Profile That Depicts