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Consider the following stock put options: Time to exp
Consider the following stock put options:
Time to exp. Exercise price. Volatility. option price.
1. 1yr. 50 .20 $10
2. 1yr. 50 .25 $10
3. 2 yr 50 .20 $10
4. 3 yr 50 .25 $10
Which put option is for the stock with the lowest stock price?
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A) 1.
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B) 2.
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C) 3.
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D) 4.
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E) Need more information to determine
Expert Solution
The put option which is having the lowest time duration to expire and which is also having the lowest volatility and it is also having the similar option price is reflecting the stock put option with the lowest stock price because it will be reflecting that this stock is already almost trading to the zones of being exercised.
it will be one year time to expiration with the exercise price of 50 and volatility of .20 and option price of $10.
All the other options are false.
Correct answer will be option (A)1
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