An 'at-the-money' option has:
A) Intrinsic value but no time value
B) Time value but no intrinsic value
C) Both time value and intrinsic value
D) Neither time value nor intrinsic value

Question

Quizplus · Accepted Answer

An 'at-the-money' option is one where the strike price of the option is the same as the current market price of the underlying asset. This means that the option has no intrinsic value, as exercising the option at this point would result in no profit. However, the option still has time value, as there is still a possibility that the market price of the underlying asset could move in a favorable direction before the option's expiration date. Therefore, 'at-the-money' options have time value but no intrinsic value.

An 'At-The-Money' Option Has