CFA Level I · CFA Level I Exam · Forward Commitment and Contingent Claim Features and Instruments
A call option and a put option on the same underlying have the same exercise price. The call is in the money. The put is most likely:
The put is out of the money. A call is in the money when the underlying price is above the exercise price, and with the same exercise price a put has no positive exercise value in that situation, so it is out of the money.
- Aat the money
- Bin the money
- Cout of the moneyCorrect
Explanation
A call is in the money when the underlying price exceeds the exercise price. For the same exercise price, a put is then out of the money because it would pay nothing if exercised at that price.
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