Assume You Own Both a June 20 Put and a June

question 25

Multiple Choice

Assume you own both a June 20 put and a June 20 call on ALPO stock.Which one of the following statements is correct concerning your option positions? Ignore taxes and transaction costs.

• A)Both a May 20 put and a May 20 call on ALPO will have higher values than your June 20 options.
• B)An increase in the stock price will increase the value of your put and decrease the value of your call.
• C)A decrease in the stock price will decrease the value of both of your options.
• D)If put-call parity does not hold,you can profit from your positions even if ALPO stock sells for $20 a share.
• E)The time premium on your June 20 put is equal to the time premium on a July 20 put on ALPO.

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Definitions:

Deinstitutionalization

The process of reducing or eliminating long-term psychiatric care facilities, moving patients to community-based treatments.

Deinstitutionalization

The process of reducing reliance on large, centralized institutions, such as psychiatric hospitals, for the care of individuals with mental illness, favoring community-based services instead.

Community-Based Facilities

Local establishments designed to provide services or support to community members, often focusing on health, education, or social services.

Outpatient Care

Medical treatment provided to patients who do not require hospitalization and can return home after the procedure or consultation.