A call option's intrinsic value is deemed in-the-money if ___________?
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Answer: A. stock price > exercise price
Explanation
A call option is in-the-money when the market price of the underlying stock is higher than the option exercise price. This condition allows the holder to purchase shares below the prevailing market price for an immediate profit. In-the-money options possess positive intrinsic value that attracts active trading interest on exchanges. A call option grants the holder the right to buy a specified stock at a predetermined exercise price. Intrinsic value for a call option equals the stock price minus the exercise price when positive. Traders evaluate option moneyness continuously to determine optimal exercise or liquidation timing.
Retail and institutional investors seek out in-the-money call options to maximize leveraged equity exposure. Options market makers adjust bid and ask spreads based on the moneyness status of underlying contracts. Hedging strategies often utilize in-the-money options to protect portfolios against adverse stock movements. Stock price treasury price is an incoherent comparison that does not relate to option exercise conditions. Treasury price bond price compares fixed income assets rather than option strike and stock prices. None of these is incorrect because the first option choice accurately defines an in-the-money call.
- Subject
- Accounting and Finance
- Category
- Finance
- Topic
- —
- Difficulty
- medium
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