The relationship between the prices of the underlying stock,a call option,a put option,and a riskless asset is referred to as the ________ relationship.
A)put-call parity
B)covered call
C)protective put
D)straddle
E)strangle

Question

Quizplus · Accepted Answer

Put-call parity is the relationship between the prices of the underlying stock, a call option, a put option, and a riskless asset. It states that the price of a European call option minus the present value of the exercise price must be equal to the present value of the stock price minus the price of a European put option with the same exercise price and expiration date. This relationship holds true in a frictionless market and is used in options pricing and trading strategies. The other choices, covered call, protective put, straddle, and strangle, are all options trading strategies that involve buying or selling options and/or stock positions to manage risk or profit from market movements.

The Relationship Between the Prices of the Underlying Stock,a Call