Question of the Week – Option Pricing

Also, you can intuitively tell that the put price would be below $7.50. The 55 call is $5 in the money trading at $7.50, so the value of the 55 put, which is $5 out of the money, would obviously be lower than the 55 call.

exam_whiz said:

Yes that is true!  Reasoning like that is useful as it gives you more time to focus on other questions.

I just started studying for the CFA and got the good answer this way. I guess I still have to learn the formula for the real exam, though…

@Alaric This “put call parity” formula is one of the most fundamental formulas around when it comes to options so it is definitely worthwhile, and actually pretty necessary to learn.