What combination of puts and calls can simulate a long stock investment?
A) long call and short put
B) long call and long put
C) short call and short put
D) short call and long put

Question

Quizplus · Accepted Answer

A long call and short put combination can simulate a long stock investment because both positions benefit from an upward movement in the stock price. A long call gives the holder the right to buy the stock at a set price, benefiting from a rise in stock price. A short put obligates the seller to buy the stock at a set price, which is also a bullish position since the seller benefits if the stock price stays above the put's strike price.

What Combination of Puts and Calls Can Simulate a Long