Valuation of European Call Options

Hard Derivative Pricing And Valuation Options

Imran is evaluating two European call options on the same underlying asset, with expiration dates six months apart. The first option has a strike price of $50, while the second option features a strike price of $55. Both options are currently priced at $4 and $2, respectively. If the underlying asset currently trades at $52, which of the following statements about these options is true?

The first option is overvalued compared to the second option.

Both options are fairly priced based on their respective strike prices.

The second option has a higher implied volatility than the first option.

Hint

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