Chapter 02 · Section 2.1
Combination of the two positions
Nick writes a December 104 call on IBM for which he receives a premium of $4.
In order to cover the position he buys 100 IBM shares for $105 each.
The combination of the two positions is the equivalent of:
b) a short Dec 104 put for $5
No. The premium is equal to the difference ( and not the sum ) between the premium of the call and the price of the IBM shares minus the exercise price of the option: eg. 4 - (105 - 104) = 3.
a) a short Dec 104 put for $3
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