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

Question

Quizplus · Accepted Answer

Buying a call option (I) will allow you to profit if the stock price goes up, while selling a put option (IV) will allow you to profit if the stock price stays the same or goes up. Buying a put option (II) will only allow you to profit if the stock price goes down, and selling a call option (III) will only allow you to profit if the stock price stays the same or goes down. Therefore, the correct option strategies to create a profit would be buying a call (I) and selling a put (IV), so answer D is correct.

Suppose You Feel a Certain Stock Will Appreciate in Value