How can options be used to synthesise a short position in the underlying commodity?
A) A short put option + long call option at the same
B) A long put option + short call option at the same
C) A short put option + short call option at the same
D) A long put option + long call option at the same s

Question

Quizplus · Accepted Answer

A long put option gives the holder the right to sell the underlying commodity at a specific price, while a short call option gives the holder the obligation to sell the underlying commodity at a specific price. By combining these options, an investor can create a synthetic short position in the commodity without actually owning it.

How Can Options Be Used to Synthesise a Short Position