Answered step by step
Verified Expert Solution
Question
1 Approved Answer
You estimate that the volatility on STOCK X from now until expiration in February will be 70%. You check the option market and noted that
You estimate that the volatility on STOCK X from now until expiration in February will be 70%. You check the option market and noted that the implied volatility on STOCK X's February option is 65%.
Assuming that you trust your estimate and would like to make some trades using it, what trades should you place on STOCK X's February options?
Sell February calls and buy February puts
Sell February calls and puts
Buy February calls and puts
Buy February calls and sell February puts
Please answer fast thanks.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started