Asked by Veronica Krall on May 16, 2024
Verified
A put option on a stock is said to be in 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.
Put Option
A financial contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying asset at a predetermined price within a specified time frame.
Exercise Price
The sum for which the bearer of an option has the privilege to acquire (with a call option) or dispose of (with a put option) the foundational asset.
Stock Price
The cost of purchasing a share of a company's stock, reflecting the market's valuation of the company at any given time.
- Learn the theories pertaining to in the money, at the money, and out of the money options.
Verified Answer
JG
James GonzagaMay 21, 2024
Final Answer :
A
Explanation :
A put option is considered in the money when the exercise price (strike price) is higher than the current market price of the stock. This means the option holder can sell the stock at a higher price than the current market price, potentially making a profit.
Learning Objectives
- Learn the theories pertaining to in the money, at the money, and out of the money options.