Asked by Yanan Zhang on May 06, 2024
Verified
The current market price of a share of Disney stock is $60. If a call option on this stock has a strike price of $65, the call
A) is out of the money.
B) is in the money.
C) can be exercised profitably.
D) is out of the money and can be exercised profitably.
E) is in the money and can be exercised profitably.
Strike Price
The specified price at which the holder of an option can buy or sell the underlying security.
Market Price
The current price at which an asset or service can be bought or sold in a marketplace, determined by supply and demand dynamics.
- Evaluate the earnings potential and strategic tactics in distinct market situations for both types of options: call and put.
Verified Answer
AM
Amber MorrisMay 08, 2024
Final Answer :
A
Explanation :
A call option is considered "in the money" when the stock price is above the strike price. Since the current market price ($60) is below the strike price ($65), the call option is "out of the money," meaning it would not be profitable to exercise the option at this time.
Learning Objectives
- Evaluate the earnings potential and strategic tactics in distinct market situations for both types of options: call and put.