Recently you bought a call and a put option on a stock with a common exercise price of $75.The call premium was $5 and the put premium was $3.You will make money from this position if the stock price is:
A)greater than $75, but less than $78.
B)greater than $75, but less than $80.
C)greater than $72, but less than $75.
D)less than $67, or greater than $83.

Question

Quizplus · Accepted Answer

The total cost of the options is $5 (call) + $3 (put) = $8. For profit, the stock price must move beyond the exercise price plus or minus the total cost of the options. Therefore, it must be either below $67 ($75 - $8) or above $83 ($75 + $8).

Recently You Bought a Call and a Put Option on a Stock