An at-the-money call option:
A) Costs more than an in-the-money call option
B) Costs less than an out-of-the-money call option
C) Costs more than an out-of-the-money call option
D) Costs the same as an at-the-money put option

Question

Quizplus · Accepted Answer

An at-the-money call option has a strike price that is the same as the current market price of the underlying asset. Therefore, it is priced higher than an out-of-the-money call option, which has a strike price above the current market price, but lower than an in-the-money call option, which has a strike price below the current market price. An at-the-money put option will have a different price than an at-the-money call option, as put options give the holder the right to sell the underlying asset at the strike price, while call options give the holder the right to buy the underlying asset at the strike price. Therefore, D is incorrect.

An At-The-Money Call Option