Riskiness and Rank Position Forms
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I am trying to answer the following two part question:
(a) You own 100 shares of GE stock. In terms of riskiness, rank the positions form by alternatively combining with a long call, a long put, writing a call and writing a put, and briefly explain why?
(b) You are short 100 shares of GE stock. In terms of riskiness, rank the positions form by alternatively combining with a long call, a long ut, writing a call and writing a put, and briefly explain why?
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Solution Summary
The riskiness and rank position forms are determined. The specific price within a time period is analyzed for GE stocks.
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(a) You own 100 shares of GE stock. In terms of riskiness, rank the positions form by alternatively combining with a long call, a long put, writing a call and writing a put, and briefly explain why?
A call option gives an investor the right (but not the obligation) to buy a stock at a specified price within a specific time period. A call becomes more valuable as the price of the underlying stock appreciates.
Then in a call option, you own 100 shares of GE stock and write a call option. The long call can buy the stock when the price is increasing. If the price decreases, he can just buy at the market price and let the call option expire. Thus, his ...
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