Which one of the following statements is correct?
A) A June 25 call is worth more than the June 20 call on the same stock.
B) If the May 30 put on ABC stock is in the money then the May 30 call on the same stock must be out of the money.
C) A put is in the money when the stock price exceeds the exercise price.
D) The time premium increases as the time to expiration nears.
E) The beneﬁt to the put writer increases as the stock price falls below the exercise price.

Question

Quizplus · Accepted Answer

If a put option is in the money, it means the stock price is below the exercise price. Therefore, the call option with the same exercise price would be out of the money, as the stock price is below the exercise price.

Which One of the Following Statements Is Correct