Implied volatility

[qin841121]

With all other things being equal, a risk monitoring system that assumes constant volatility for equity returns will understate the implied volatility for which of the following positions
by the largest amount:
a. Short position in an at-the-money call
b. Long position in an at-the-money call
c. Short position in a deep in-the-money call
d. Long position in a deep in-the-money call

answer is D. But why can't it be C as does long and short position matter?

 

[sl]

Choice C and D are opposite of each other. The person who is long a deep ITM will exercise the call.

 

[qin841121]

but won't volatility be the same for both (I keep drawing the volatility skew in my mind)

 

[sl]

The vol skew will show you that the ITM call/OTM put have higher implied vol than OTM call/ITM put

 

[David Harper CFA FRM]

I agree with qin841121, the question makes no sense to me at all. Long/short don't impact the implied volatility, ceteris paribus. I can't make sense of it. The question's intent may be: the long position's actual returns should be greater as the long is long volatility; compare to the short position, who is short volatility, should lose more than expected if realized/implied volatility is greater than expected. Put another way, if implied volatility < realized volatility, the long call outperforms, the short call will underperforms (but the question does not set this up, if that is the intent, imo the question is lame for confused understanding).