CFA Practice Question

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CFA Practice Question

For a call option, ______

I. rho is always negative.
II. theta is generally negative.
III. vega is always negative.
Correct Answer: II only

For a call option, rho (RHOc) is always positive. For a put option, rho (RHOp ) is always negative.
VEGAc and VEGAp are identical and always positive.

User Contributed Comments 2

User Comment
ramdabom I thought Theta relates to time. How can it be negative?
cowboy @ramdabom: yes it relates to time. as time goes by an option decreases in value.
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