You Buy an At-The-Money Chooser Option

question 8

Multiple Choice

You buy an at-the-money chooser option. Immediately after you buy it, the price of the underlying increases very sharply. Other things remaining the same, the value of your chooser likely

• A) Increases.
• B) Decreases (the put now has no value).
• C) Remains constant (the increase in call value is canceled out by the decrease in put value).
• D) Goes to zero.

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Definitions:

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