1. Comment on the following statement: “It seems to me that with at-the-money options on a given stock, the calls usually sell for more than the puts.”
2. Suppose you look in the newspaper and see that an option has changed price since yesterday, but the stock price has remained the same. Explain three factors that could cause the option premium to change while the stock price remains unchanged.
3. Briefly explain, in words, why the price of a put option and the price of a call option on the same stock are not independent.
4. XYZ Corporation sells for $35 per share; the AUG option series has exactly six months until expiration. At the moment, the AUG 35 call sells for $3, and the AUG 35 put sells for $1 3/8. Using this information, what annual interest rate is implied in the prices?
5. List four reasons why the price of a put option might go down.