Which of the following options strategies would be considered bullish quizlet?

If an investor has a gain on a short stock position, which of the following can be used to protect this gain?
I Buy a call
II Sell a put
III Buy a put
IV Place a buy stop order

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Which of the following would be considered a bullish strategy?
Which of the following would be considered a bullish strategy quizlet?
Which of the following formations are bullish?
Which of the following options strategies would be considered a covered call quizlet?

A I, II, IV
B I, III, IV
C II, III, IV
D I, II, III, IV

The best answer is C.
A spread is a buy and a sell of the same type of option with different strike prices and/or expirations. Since the customer is already short a call, he must be long a call to create a spread. In order for the position to be a "short call spread," the customer must be a net seller, meaning he must sell the more expensive contract and buy the less expensive one. Since the lower strike price contracts are worth more money (for calls, since the contract grants the holder the right to buy at the strike price, and lower is a better price at which to buy), the customer must buy the higher strike price contract to create a net credit position. This is a bearish strategy. In this example, if the customer sells the Jan 40 Call (higher premium) and buys the Jan 50 Call (lower premium), the customer creates a credit spread. If the market falls below $40, both positions expire "out the money" and the credit is the maximum profit. On the other hand, if the market rises above $50, both positions go "in the money" and are exercised. In this case, the customer must deliver stock at $40 that is purchased at $50 for a 10 point loss (net of any credit received). This is the maximum potential loss.

The best answer is B.
For income, the customer must sell options, so Choices A and C are out. If the customer sells S&P 100 Index (OEX) Calls, the customer will earn premium income if the market stays flat or declines. The premium earned will help offset any loss on the stock portfolio. If the market rises, the calls will be exercised, but the loss on the exercise of the calls should be offset by the increase in the value of the stock portfolio. Thus, this is a conservative income strategy.
The VIX option value is not based on stock price movements - rather it is based on price volatility. It is negatively correlated to the market. If the market declines, volatility increases and the VIX increases in value. The VIX calls would be exercised. The customer would lose on both the short VIX option positions and the equity portfolio. So this strategy has greater risk potential in a down market than selling S&P 100 index calls. On the other hand, in a rising market, volatility decreases. The short VIX option will lose value and will likely expire. The customer will keep the premium and will enjoy the rise in value of the equity portfolio as well. So for the greater risk assumed in a down market, the investor has greater gain potential in an up market.
Since this investor is "conservative" and is seeking income, the sale of the OEX Calls is the better choice since it is lower risk.

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