Which strategy best fits his objective

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Ben owns 1,000 shares of stock that is selling for $40 per share. He wants to defer selling the stock until next January for tax reasons. He wants to find a strategy that guarantees he will have at least $40,000 in value next January. He is considering the following strategies:

(i) sell (write) January call options on the stock with exercise price = $40. These calls are selling for $3

(ii) buy January put options with exercise price = $40. These options sell for $3

(iii) establish a zero cost position by selling (writing) the January call options in

(i) and buying the January put options in (ii)

Which strategy best fits his objective? Explain.

Reference no: EM13809803

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