Which of the following strategies makes a profit when the stock price declines and loses money when the stock price increases?
A) long call and short put
B) long call and long put
C) short call and short put
D) short call and long put

Question

Quizplus · Accepted Answer

A short call and long put strategy involves selling a call option and buying a put option of the same underlying asset and expiration date. This strategy makes a profit when the stock price declines as the value of the put option increases, but loses money when the stock price increases as the value of the call option decreases. Therefore, D is the correct choice.

Which of the Following Strategies Makes a Profit When the Stock