Which of the following statements is not always true assumin

Which of the following statements is not always true, assuming the same underlying? American Option Premium > European Option Premium Long Call + Short Put = Long Stock 3 month ATM (at-the-money) Spot Call Premium

Solution

Ans : American option premium is always more than European option premium , as in American there is a flexibility to execute it anytime and in European we can only execute at maturity only.

Option a not the answer.

Option b is also not correct, as for long call and short put, when price go down - need to buy the stock by executing long call and if go down short put will be executed.

Option d is also does not seem to correct, as forward for high dividend stock is always less than forward of low dividend stock. As high dividend stock will actually leak funds out of the company and do not indulge in the opertional purpose for expansion.

Option c seems to be correct as 3 month premium is not always less than 2 month ATM premium.