Alicia is considering purchasing a small building with the intent of opening a craft and sewing center. The cost of the building is $49,000 and the cost to open the center is an additional $150,000. If the center is opened and no other competition is nearby the project will provide a hefty return. However, should the vacant building down the street be used for a competitive type entity, then the center could be a losing proposition. Assume the building is purchased but the opening of the center is delayed. This situation would best be described as _____ on a craft and sewing center.

Multiple Choice

• exercising a call on the land and writing a put

• purchasing a call option

  Correct

• purchasing a put option

• writing a put option

• writing a call option

  Incorrect