Question

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.

Answer 1

Answer is option d. a put option with a strike price of $60.00 is out of the money..

Option is said to be in the money if its value is positive if we exercise it today.

Therefore, if the call option is in the money, it means Current Spot Price of stock is more than $ 65

Intrinsic value of in the money options is positive and out of the money options is negative.

a. a put option with the same strike price is also in the money. Incorrect stock price is more than $65

b. the intrinsic value of the call is negative. Incorrect since call option is in the money.

c. the intrinsic value of a put option with the same strike price is negative. Incorrect since intrinsic value can't be less than zero.

d. a put option with a strike price of $60.00 is out of the money. Correct since current spot price of stock is more than $65.

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