A put writer would be "covered" by: (A) A long call (B) Another short put (C) Cash equal to the strike price multiplied by 100 shares (D) An escrow receipt for 100 shares of the underlying stock

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Payten

18 December, 06:57

A put writer would be "covered" by: (A) A long call (B) Another short put (C) Cash equal to the strike price multiplied by 100 shares (D) An escrow receipt for 100 shares of the underlying stock

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Liliana Mayo · Answer 1

Cash equal to the strike price multiplied by 100 shares

Answer: Option C.

Explanation:

A covered put choice is an alternative to sell where the essayist (short) has adequate money on store, has long identical put, or has a bank ensure letter to "spread" the put whenever practiced by the holder.

A put choice gives the holder the privilege however not the commitment to sell the offers at a predefined cost during the life of the choice. Recorded as a hard copy or shorting a put choice, the merchant (essayist) of the put choice gives the privilege to the purchaser (holder) to sell a benefit by a specific date at a specific cost.