Chapter 03 · Section 3.1
Expiration and Exercise Price
Oct. Nov. Dec. Jan. Feb.
Stock X 95 97 98 99 100
Stock Y 95 125 70 145 100
As long as expiration date and exercise price are the same,
a) A call/put on stock X is less expensive than a call/put on stock Y.
b) A call/put on stock X is more expensive than a call/put on stock Y.
c) A call on stock X is more expensive than a call on stock Y and a put on stock X is less expensive than a put on stock Y.
d) A call on stock X is less expensive than a call on stock Y and a put on stock X is more expensive than a put on stock Y.
It is potentially more profitable to buy an option on an asset which moves than buying an option on an asset which does not move.
Volatility has a positive influence on the time value of an option.