In June 2020, an investor buys call options on Amgen stock with an exercise of price of $65 and expiring in January 2022. If the stock price in June 2021 is $60, then these options are
I.in-the-money;
II.out-of-the-money;
III.a LEAPS option
A)I only
B)II only
C)III only
D)II and III only

Question

Quizplus · Accepted Answer

Call options allow the holder to buy the underlying asset at the exercise price. Since the stock price ($60) is below the exercise price ($65), the options are out-of-the-money. LEAPS options are long-term options that can last up to three years, so an option from June 2020 to January 2022 qualifies as a LEAPS option.

In June 2020, an Investor Buys Call Options on Amgen