A "No-Arbitrage Restriction" on Option Prices Is the Statement That

question 3

Multiple Choice

A "no-arbitrage restriction" on option prices is the statement that

• A) Options on possibly different stocks that trade at the same price must have the same payoffs.
• B) An option written on a specific stock will be perfectly correlated with the stock.
• C) The price of an option is such that no strategy can be constructed using the option and the underlying that generates arbitrage profits.
• D) Arbitrage trading in options is prohibited by the SEC.

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Definitions:

Net Income

The amount of earnings after subtracting all costs and expenses from revenue, including taxes and other deductions. Representing a company's profit over a specified period.

Monthly Weighted

Refers to averaging or aggregating financial or statistical measures over a month with differing weights applied to the data points, taking into account their relative importance or volume within that period.

Admittance

Refers to the permission granted for entry into a system or location, or in electrical engineering, it’s the measure of how easily an alternating current flows through a conductor.

Partnership

A legal arrangement between two or more parties who agree to do business together and share its profits and losses.