A Call and a Put on a Stock Have the Same

question 8

Short Answer

A call and a put on a stock have the same strike price and time to maturity. At 10:00am on a certain day, the price of the call is $3 and the price of the put is $4. At 10:01am, news reaches the market that has no effect on the stock price or interest rates, but increases volatilities. As a result, the price of the call changes to $4.50. What would you expect the price of the put to change to? _ _ _ _ _ _

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Definitions:

Edit Selection

A feature or function in software that allows users to choose specific portions of text or data to modify or manipulate.

COA

Chart of Accounts, a list of a company's accounts and their account numbers that identifies where transactions are recorded in the financial statements.

Sole Proprietorship

A business owned and operated by a single individual, without any formal legal entity separation.

C Corporation

A legal structure for corporations in the U.S. where the owners are taxed separately from the entity, providing limited liability protection.