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

question 25

Multiple Choice

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

• A)An increase in the share 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 premiums on both your put and call are less than the time premiums on equivalent June options.
• D)A decrease in the share 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.

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Definitions:

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DNA synthesized from a messenger RNA template, allowing for the cloning and examination of specific genes.

ENCODE Project

A research initiative aimed at identifying all functional elements in the human genome.

Human Genome

The entire collection of human nucleic acid sequences, represented as DNA across the 23 pairs of chromosomes in cell nuclei and a small DNA molecule located in the mitochondria of each cell.