Chartered Financial Analyst Level 2
Get started today
Ultimate access to all questions.
Comments
Loading comments...
Ultimate access to all questions.
An options trader gathers the following data for 1-year call options on three stocks:
| Stock | Implied Volatility | Trader's Expected Volatility |
|---|---|---|
| Stock 1 | 25% | 20% |
| Stock 2 | 30% | 30% |
| Stock 3 | 22% | 28% |
Based only on this information, which of the following actions is most appropriate for the trader?
A
Buy calls on Stock 2
B
Buy calls on Stock 1 and sell calls on Stock 3
C
Sell calls on Stock 1 and buy calls on Stock 3