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Consider Five Put Options at Strikes 40, 45, 50, 55

Question 1

Multiple Choice

Consider five put options at strikes 40, 45, 50, 55, and 60. The price of the 40-strike option is $4, the price of the 50-strike put is $5, and the price of the 60-strike option is $8. Which of the following statements is most accurate? (Assume all options have the same maturity.)


A) The maximum difference between the prices of the 55-strike put and the 45-strike put is $0.
B) The difference between the maximum prices of the 55-strike put and the 45-strike put is $0.50.
C) The minimum difference between the prices of the 55-strike put and the 45-strike put is $1.00.
D) The difference between the maximum prices of the 55-strike put and the 45-strike put is $2.00.

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