Financial Risk Manager Part 1

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How can the trader transform a long option into a zero-cost derivative product?

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A

Arranging with the option seller to pay an amount equal to the upfront option premium at maturity rather than at option initiation.

B

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Entering into an agreement to purchase the payoff of the option at maturity for an amount equal to the future value of the current option premium.

C

Combining the purchase of the option with a sale of other options such that the net premium is zero and the combined payoff is identical to the payoff of the original option.

D

Purchasing the option and selling the underlying stock such that the net upfront cash flow is zero and the payoff is identical to the payoff of the original option.

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