You believe a certain stock will increase in value. Which of the following option strategies will generate a profit for you?
I. Buy a put.
II. Buy a call.
III. Sell a put.
IV. Sell a call.
A) II only.
B) II and III only.
C) I and III only.
D) I and IV only.
E) III only

Question

Quizplus · Accepted Answer

Buying a call option is a bullish strategy that will generate a profit if the stock price increases. Selling a put option is also a bullish strategy and can generate a profit if the stock price increases or remains stable. Therefore, options II and III will generate a profit in this scenario. Buying a put option (I) and selling a call option (IV) are bearish strategies, so they would result in a loss if the stock price increases. Therefore, options I and IV are not the correct choice in this scenario.

You Believe a Certain Stock Will Increase in Value