Asked by Brittany Whitworth on Apr 27, 2024
Verified
The current market price of a share of IBM stock is $76. If a call option on this stock has a strike price of $76, the call
A) is out of the money.
B) is in the money.
C) is at the money.
D) None of the options are correct.
Call Option
A financial contract that gives the buyer the right, but not the obligation, to buy a specified quantity of an asset at a set price within a specified time.
Strike Price
The rate at which an option's owner has the right to purchase (for a call option) or offload (for a put option) the underlying asset or commodity.
Market Price
The current price at which an asset or service can be bought or sold.
- Gain insight into the notions of in the money, at the money, and out of the money options.
Verified Answer
MR
Megan RoubianMay 01, 2024
Final Answer :
C
Explanation :
A call option is considered "at the money" when the stock price is equal to the strike price. In this case, since the current market price of IBM stock is $76, which is equal to the strike price of the call option, the option is at the money.
Learning Objectives
- Gain insight into the notions of in the money, at the money, and out of the money options.