What is an in-the-money call option? What is an out-of-money put option? Provide examples
In the money call option
A call option is in the money when the underlying security current market price is greater than the call options strick price. The call option is in the money because the call option buyer has the right to buy the stock below it's current trading price. When an option gives the buyer the right to buy the underlying security below the current market price then that right has intrinsic value. The intrinsic value of a call option equals the difference between underlying security current market price and the strick price.
For example, suppose a trader buys one call option on ABC with a stick price of $35 with an expiration date one month from today. If ABC's stock price traded above $35 the call option is in the money. Suppose ABC 's stock price is trading at $38 the day before the call option expires. Then the call option is in the money by $3 ($38-$35). The trader can exercise the call option and buy 100 shares of ABC for $35 and sell the shares for $38 in the open market. The trader will have a profit of $300(100*($38-$35)).
out of money put option
A put option is considered out of money when the put option's strick price is lower than the prevailing market price of the underlying stock. This allows you to sell the underlying stock for lower than the prevailing market price which will not make any sense and therefore contains no intrinsic value.
For example if Goog is trading out at$300, it's $200 stock put options are out of the money as it allows one to sell Goog at $200 when it is trading at $300 now. Here is a table explaining the status of a put option against it's underlying stock.
| Put option status | strick price |
| OTM | $200 |
| ATM | $300 |
| ITM | $400 |
What is an in-the-money call option? What is an out-of-money put option? Provide examples
What is a put option? What is a call option? How do they differ? What does it mean for a call option to be In or Out of the Money? What does it mean for a put option to be In or Out of the Money? Look in WSJ or online and and find a current quote for a stock option. Write that down in this post and then explain what it means.
What is meant by an option that is in-the-money? Graph this for both call and put options (identify x and y axis clearly).
Gordon is considering purchasing either a call or a put option on XYZ stock. Each of the options has an exercise price of $40 and XYZ is trading at $44.50 per share. Which of the following statements about the options is correct? Question 20 options: The put option is in the money, whereas the call option is out of the money. The call option is in the money, whereas the put option is out of the money. Both the put...
If a call option with a strike price of $65.00 is in the money then: Select one: a. a put option with the same strike price is also in the money. b. the intrinsic value of the call is negative. c. the intrinsic value of a put option with the same strike price is negative. d. a put option with a strike price of $60.00 is out of the money.
A put option and a call option on a stock have the same expiration date and the same exercise (or strike price). Both options expire in 6 months. Assume that put-call parity holds and interest rate is positive. If both call and put options have the same price, which of the following is true? A) Put option is in-the-money. B) Call option is in-the-money. C) Both call and put options are in-the-money. D) Both call and put options are out-of-the-money.
Consider a put option and a call option with the same strike price and time to maturity. Which of the following is TRUE? It is possible for both options to be in the money. One of the options must be either in the money or at the money. One of the options must be in the money. It is possible for both options to be out of the money.
Interpretation of the Black-Scholes model. What is the hedge ratio for a call (put) option and what is the probability that a call (put) option finishes in the money?
In expectation of increased price volatility, you purchased a at-the-money call option and at the same time bought a at-the-money put option with common exercise prices of $15. Option premium at $3 each. Your strategy is known as a_____? Please draw out the payoff-profile of this strategy and clearly state all key info. What is the maximum $ would you lose with this strategy?
what is the difference between a call option and a put option?
A European call option and put option on a stock both have a strike price of $45 and an expiration date in six months. Both sell for $2. The risk-free interest rate is 5% p.a. The current stock price is $43. There is no dividend expected for the next six months. a) If the stock price in three months is $48, which option is in the money and which one is out of the money? b) As an arbitrageur, can...