If the owner of a call option with a strike price of $35 finds the stock to be trading for $42 at expiration, then the option:
A)Expires worthless
B)Will not be exercised
C)Is worth at least $7 per share
D)Cost too much initially

Question

Quizplus · Accepted Answer

The option is in-the-money by $7 per share ($42 - $35 = $7), so it is worth at least $7 per share. The owner may choose to exercise the option and buy the stock at $35, then immediately sell the stock at the market price of $42 to realize a profit of $7 per share.

If the Owner of a Call Option with a Strike