A floor is created by combining a... purchased put option with a long position i

Question

A floor is created by combining a...

purchased put option with a long position in the underlying stock.

purchased put option with a short position in the underlying stock.

purchased call option with a long position in the underlying stock.

purchased call option with a short position in the underlying stock.

purchased put option with a long position in the underlying stock.

purchased put option with a short position in the underlying stock.

purchased call option with a long position in the underlying stock.

purchased call option with a short position in the underlying stock.

Explanation / Answer

a floor is created by combining a purchasing a put option (a right to sell) and a short position in the underlying stock.

Floor creates minimum selling price for the stock, in other words a floor is created for selling stock.

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