Asked by Yasmine Bedjaoui on Jun 22, 2024
Verified
The intrinsic value of an out-of-the-money call option ________.
A) is negative
B) is positive
C) is zero
D) cannot be determined
Out-of-the-money
Describes an option that would not make money if it were exercised immediately because its strike price is not favorable compared to the current market price of the underlying asset.
Intrinsic Value
The perceived or calculated true value of an asset, investment, or company based on fundamental analysis rather than current market price.
- Acquire knowledge on the intrinsic and time value aspects of options.
Verified Answer
AM
Andile MhlabaneJun 24, 2024
Final Answer :
C
Explanation :
The intrinsic value of an out-of-the-money call option is zero because the option's strike price is above the current market price of the underlying asset, meaning there is no inherent profit in exercising the option.
Learning Objectives
- Acquire knowledge on the intrinsic and time value aspects of options.