A call option whose underlying stock value is less than the corresponding exercise price is an example of a(n)
A) Straddle option.
B) Put option.
C) Out-of-the-money option.
D) Naked option.
E) Covered option.

Question

A call option whose underlying stock value is less than the corresponding exercise price is an example of a(n)
A) Straddle option.
B) Put option.
C) Out-of-the-money option.
D) Naked option.
E) Covered option.

Quizplus · Accepted Answer

An out-of-the-money option is a call or put option that has no intrinsic value because its underlying asset's current price is less than the option's strike price (exercise price). In this case, the call option's underlying stock value is less than the strike price, making it an out-of-the-money option.

A Call Option Whose Underlying Stock Value Is Less Than