Which of the following statements is true?
A) Both call and put options are in the money if the stock price is above the exercise price.
B) Both call and put options are in the money if the stock price is below the exercise price.
C) Call options are in the money if the stock price is above the exercise price. Put options are in the money if the stock price is below the exercise price.
D) Call options are in the money if the stock price is below the exercise price. Put options are in the money if the stock price is above the exercise price.

Question

Quizplus · Accepted Answer

Call options give the holder the right to buy the underlying asset at the exercise price. If the current stock price is above the exercise price, buying at the exercise price is advantageous, making the call option in the money. Conversely, put options give the holder the right to sell the underlying asset at the exercise price. If the current stock price is below the exercise price, selling at the exercise price is advantageous, making the put option in the money.

Which of the Following Statements Is True