Question

Which of the pricing relationship below is correct?

		A call option has no value at expiration if the stock price is greater than the strike price.
		Put options with a lower strike price are worth at least as much as put options with a higher strike price.
		The net profit at expiration for a put is the strike price plus the price of the stock at expiration minus the price of the put at expiration.
		The net profit at expiration for a call is the higher of stock price minus the strike price or zero, minus the call price paid up front.
		Both a and d are correct.

Answer 1

ANSWER DOWN BELOW. FEEL FREE TO ASK ANY DOUBTS. THUMBS UP PLEASE. .

Answer d. The net profit at expiration for a call is the higher of stock price minus the strike price or zero, minus the call price paid upfront.

Explaination:

Net profit from of Call option = Max(0, S-X) - Call premium.

Where S = Stock Price

X = Strike Price.

a is incorrect because: Call option has value when S> X

b is incorrect because: for put, Higher the X, higher the value.

c is incorrect because: Net profit for put = Max(0, X-S) - Put premium.