Question

At the opening of the market, a call on Google, with strike $1050, is trading at $80, while a put on Google with strike $1050 is trading at $60. Both call and put have the same 5 year expiry. If, at the close of the market on the same day, the call is trading at $90, while the put is trading at $55, Google’s closing market price is _____ the opening market price? Prevailing interest rate in the market was unchanged during the day.

one of the above
		Greater than
		Same as
		Lesser than

Answer 1

Correct answer: Greater than

If other factors remain same then Call price increase as price of underlying asset increases and Put price decreases as price of underlying asset increases.

In given case,

Open Call price = $80

Close Call price = $90

and

Open Put price = $60

Close Put price = $55

Close price of Call has increased and close price of Put has decreased. Thus, Google's closing market price is Greater than opening market price.