The price of a stock is $40. A six-month European call option on the stock with a

Question:

The price of a stock is $40. A six-month European call option on the stock with a of $30 has an implied volatility of 35%. A six month European call option on the stock with a of $50 has an implied volatility of 28%. The six-month risk-free rate is 5% and no dividends are expected. Explain why the two implied volatilities are different. Use DerivaGem to calculate the prices of the two options. Use put–call parity to calculate the prices of six-month European put options with strike prices of $30 and $50. Use DerivaGem to calculate the implied volatilities of these two put options. Strike Price
In finance, the strike price of an option is the fixed price at which the owner of the option can buy, or sell, the underlying security or commodity.