Suppose a stock is currently priced at $40 per share, a February 35 call has a premium of $8, and a February 45 put has a premium of $7. If you wanted to sell this stock above the current market price using options, at what effective price could you sell the stock if the option is exercised? (Ignore brokerage commissions.)
A) 41
B) 42
C) 43
D) 45

Question

Quizplus · Accepted Answer

If you sell a February 35 call, you receive a premium of $8. If the option is exercised, you sell the stock at $35. Therefore, the effective selling price is $35 + $8 = $43.

Suppose a Stock Is Currently Priced at $40 Per Share