When the existing spot rate exceeds the exercise price, a call option is ____, and a put option is ____.
A) out of the money; in the money
B) out of the money; out of the money
C) in the money; in the money
D) in the money; out of the money

Question

When the existing spot rate exceeds the exercise price, a call option is ____, and a put option is ____.​
A) ​out of the money; in the money
B) ​out of the money; out of the money
C) ​in the money; in the money
D) ​in the money; out of the money

Quizplus · Accepted Answer

When the existing spot rate exceeds the exercise price, a call option is considered "in the money" because it allows the holder to buy the asset below its current market price. Conversely, a put option is "out of the money" because the holder would not exercise the option to sell the asset at a price lower than the market rate.

When the Existing Spot Rate Exceeds the Exercise Price, a Call