Consider a portfolio comprised of a short call and a short put,both options written on the same stock,same strike,and for the same maturity.Which of the following is valid?
A)The intrinsic value of the portfolio is zero.
B)The time value of the portfolio is zero.
C)The insurance value of the portfolio is negative.
D)All of the above.

Question

Quizplus · Accepted Answer

Use the value decomposition equations of calls and puts,adding them up to see the validity of these statements.

Consider a Portfolio Comprised of a Short Call and a Short