The Madisons are concerned that ABC stock may substantially decline in price in the near future. Which of the following option strategies would best protect the Madisons’ position in ABC stock? (Assume they own 100 shares currently valued at $130 per share and all options will expire within 60 days.) A. Sell one call option with an exercise price of $150 for $0.50 per share. B. Sell one put option with an exercise price of $120 for $2.95 per share. C. Buy one put option with an exercise price of $120 for $3.00 per share. D. Buy one call option with an exercise price of $100 for $38.25 per share.
Added by Victor L.
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They are worried about a potential decline in the price of ABC stock, which they currently own 100 shares of at $130 per share. They need a strategy to protect their investment from a significant drop in value. Show more…
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