Consider a put option and a call option with the same strike price and time to...
Consider a put option and a call option with the same strike price and time to maturity. Which of the following is TRUE?
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It is possible for both options to be in the money. |
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One of the options must be either in the money or at the money. |
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One of the options must be in the money. |
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It is possible for both options to be out of the money. |
Homework Answers
Answer: The correct answer is "One of the options must be either in the money or at the money".
Explanation:
Case I
Share price > strike price, it means that the the call option is
in the money whereas the put option is out of the money.
Case II
Share price < strike price, it means that the call option is out
of the money whereas the put is in the money.
Case III
Share price = strike price, it means that both the call and put
options are at the money.
Add Answer to:
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