You Hold a Portfolio of a Long Position in a Call

question 12

Multiple Choice

You hold a portfolio of a long position in a call and a long position in a put, both for the same strike and maturity. Which of the following statements is true?

• A) When the stock price increases, the rho of the portfolio increases if and only if the call is in-the-money.
• B) When the stock price increases, the rho of the portfolio decreases if and only if the call is out-of-the-money.
• C) When the stock price increases, the rho of the portfolio increases whether or not the call is in-the-money.
• D) When the stock price increases, the rho of the portfolio may increase, decrease or stay constant depending on volatility and depth-in-the-money.

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Definitions:

Mesenteries

Folds of peritoneum that attach the intestines to the posterior abdominal wall, providing support and housing blood vessels, nerves, and lymphatic vessels.

Serosal Lining

A smooth membrane consisting of a layer of cells which secrete serous fluid, covering internal organs and cavities.

Mucosal Lining

The moist, protective tissue lining various organs and body cavities, such as the mouth, nose, and digestive tract.

Alimentary Canal

The whole passage along which food passes through the body from mouth to anus, including the esophagus, stomach, and intestines.