Assume That You Own Both a May 40 Put and a May

question 403

Multiple Choice

Assume that you own both a May 40 put and a May 40 call on ABC stock. Which one of the following statements is correct concerning your option positions? Ignore taxes and transaction costs.

• A) An increase in the stock price will increase the value of your put and decrease the value of your call.
• B) Both a May 45 put and a May 45 call will have higher values than your May 40 options.
• C) The time premium on both your put and call are less than the time premiums on equivalent June options.
• D) A decrease in the stock price will decrease the value of both of your options.
• E) You cannot profit on your position as your profits on one option will be offset by losses on the other option.

---

Definitions:

Sentence Completion Forms

A psychological assessment tool where individuals complete sentences in order to reveal aspects of their personality, attitudes, and psychological state.

Validated

The process of proving or confirming the accuracy or reliability of something, often through rigorous testing or examination.

Psychological Instruments

Tools and tests used by psychologists to measure mental functions and behaviors.

Dubious Distinction

A questionable or uncertain honor or recognition, often implying that the merit of the distinction is not entirely positive.