Asked by maisha ahmed on Apr 25, 2024
A call option on a stock is said to be out of the money if
A) the exercise price is higher than the stock price.
B) the exercise price is less than the stock price.
C) the exercise price is equal to the stock price.
D) the price of the put is higher than the price of the call.
E) the price of the call is higher than the price of the put.
Call Option
A contract which allows an investor the option, without being required, to purchase a stock, bond, commodity, or any other financial instrument at a predetermined price during a certain time frame.
Exercise Price
The specified price at which the holder of an option can buy or sell the underlying asset.
Stock Price
The cost of purchasing a share of a company's stock, determined by supply and demand in the market.
- Familiarize oneself with the terms in the money, at the money, and out of the money options.
- Identify the differences between put options and call options, including their behaviors in the market.
Learning Objectives
- Familiarize oneself with the terms in the money, at the money, and out of the money options.
- Identify the differences between put options and call options, including their behaviors in the market.