Question

6. travis owns both a september $30 call and a september $30 put. if the call finishes at-the-money, then the put will: a) finish in-the-money. b) finish at-the-money. c) finish out-of-the-money. d) either finish at-the-money or in-the-money. e) either finish at-the-money or out-of-the-money.

Answer 1

If Travis owns both a September $30 call and a September $30 put, it means he has a long straddle options strategy. In this scenario, if the call finishes at-the-money, it means the underlying asset's price at expiration is exactly $30.

In this case, the put option would finish out-of-the-money. This is because the put option will only be profitable if the underlying asset's price is below the strike price ($30 in this case) at expiration. Since the call option finished at-the-money, it means the underlying asset's price did not go below $30, so the put option did not gain any intrinsic value and therefore finished out-of-the-money.

Therefore, the answer is c) finish out-of-the-money.