A call option on Japanese yen has a strike (exercise) price of $.012. The present exchange rate is $.011. This call option can be referred to as:
A) in the money.
B) out of the money.
C) at the money.
D) at a discount.

Question

A call option on Japanese yen has a strike (exercise) price of $.012. The present exchange rate is $.011. This call option can be referred to as:​
A) ​in the money.
B) ​out of the money.
C) ​at the money.
D) ​at a discount.

Quizplus · Accepted Answer

The strike price of $.012 is higher than the present exchange rate of $.011, meaning that the call option is out of the money. It would only be considered in the money if the strike price was below the present exchange rate. At the money refers to a strike price that is equal to the present exchange rate, and at a discount would refer to the option being offered at a lower price than its intrinsic value.

A Call Option on Japanese Yen Has a Strike (Exercise)