Slide 21. A stock is being traded at $55. A call option and a put option on the stock have strike price $50. Which of the following statements is correct? Why?

1. The call is in of the money and the put is out of the money
2. The call is out of the money and the put is in the money
3. Both the call and put are in the money
4. Both the call and put are out of the money