A Call Option Has an Exercise Price of $150

Multiple Choice

A call option has an exercise price of $150. At the option expiration date, the stock price could be either $100 or $200. Which investment would combine to give the same payoff as the stock?

A) Lend PV of $100 and buy two calls.
B) Lend PV of $100 and sell two calls.
C) Borrow $100 and buy two calls.
D) Borrow $100 and sell two calls.