Which of the following statements is true?

Question

Quizplus · Accepted Answer

At expiration, the value of a call option is the greater of (Share Price - Exercise Price) or 0, because a call option gives the holder the right to buy shares at the exercise price. If the share price is above the exercise price, the call has value. Conversely, the value of a put option is the greater of (Exercise Price - Share Price) or 0, because a put option gives the holder the right to sell shares at the exercise price. If the share price is below the exercise price, the put has value. Therefore, both statements A and D are correct.

Which of the Following Statements Is True