Question 2290 of 3960 from exam CFA® LEVEL 1: CFA® Level 1

Prev Question Next Question

Question

Wilma Green has been following the stock price movements of Bakery Supply International (BSI) and Hull Petrochemical Company (HPC). Green is convinced that the price of BSI stock is going to dramatically increase from its current price of $53.60 and that the price of HPC stock is going to dramatically decrease from its current price of $9.80. She has decided to use options to take advantage of the situation and has thus gathered the following data on three-month put and call options for the two stocks:

If after three months, the price of BSI stock is $54.60 and the price of HPC stock is $8.13, which of the following strategies would have yielded Green the greatest profits?

Answers

A. Short BSI put with a $45.00 strike; Short HPC call with a S7.50 strike.

B. Long BSI put with a $45.00 strike; Long HPC call with a $7.50 strike.

C. Short BSI call with a $55.00 strike; Long HPC put with a $10.00 strike.

Show Answer

Explanations

Click on the arrows to vote for the correct answer

A. B. C.

Prev Question Next Question