Chapter 02 · Section 2.1

The combined position

Nick is the writer of a Dec IBM 104 put for which he receives a premium of $3. He is also short 100 IBM shares to cover the position. As a result the combined position is equivalent to:

a) a short Dec 104 call at $1
• b) a short Dec 104 call at $5
  Yes. The profit/loss profile of the witten put covered by a short position in the underlying is the same as the short call.The premium is equal to the sum of the put premium and the price received for the underlying minus the exercise price of the put. Continue

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