You Find the Option Prices for Three June Call Options

question 30

Multiple Choice

You find the option prices for three June call options on the same stock. The 95 call has an implied volatility of 25%, the 100 call has an implied volatility of 25%, and the 105 call has an implied volatility of 30%. If you believe this represents a mispricing situation. you may want to ________.

• A) buy the 105 call and write the 100 call
• B) buy the 105 call and write the 95 call
• C) buy either the 95 or the 100 call and write the 105 call
• D) write the 105 call and write either the 95 or the 100 call

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Definitions:

Statement Of Retained Earnings

A financial report that reveals the changes in retained earnings for a particular period of time.

December 31

Refers to the last day of the year, often associated with the end of the fiscal year for many companies.

Statement Of Retained Earnings

A financial report summarizing the changes in retained earnings for a specific period.

December 31

December 31 is the last day of the year in the Gregorian calendar, often associated with closing the annual accounting period for businesses.