SIE practice questionmediumOptions - Strategies
An investor buys a put option and simultaneously sells a call option on the same stock and strike price. What type of position is established?
- ASynthetic short position✓ Correct answer
- BCovered call
- CProtective put
- DBull call spread
Explanation
Why A — Synthetic short position
Buying a put and selling a call simulates the payoff of short stock. Covered calls require stock ownership, protective puts combine long stock and puts, bull call spreads use two calls.
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