Assume that you own both a May 40 put and a May 40 call on ABC stock.Which one of the following statements is correct concerning your option positions? Ignore taxes and transaction costs.
A) Both a May 45 put and a May 45 call will have higher values than your May 40 options.
B) An increase in the stock price will increase the value of your put and decrease the value of your call.
C) A decrease in the stock price will decrease the value of both of your options.
D) The time premiums on both your put and call are less than the time premiums on fequivalent June options.
E) You cannot profit on your position as your profits on one option will be offset by losses on the other option.
Correct Answer:
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