Which of the following is correct for the owner of a June call,valued at $3,on XYZ Corp.with a strike price of $60? XYZ Corp.currently trades at $55.
A) XYZ is expected to go to $63 per share.
B) The option cannot currently be exercised.
C) The option owner's current profit is $3 per share.
D) The option may expire without value.

Question

Quizplus · Accepted Answer

The owner of the June call option has the right to buy the shares of XYZ Corp. at the strike price of $60. However, since the current market price of XYZ Corp. is only $55, it is not profitable to exercise the option at the moment. Therefore, the option may expire without any value. So, option D is correct. Options A and C are incorrect because there is no information about the future movement of XYZ Corp. stock prices, and the current profit of the option owner is only theoretical until the option is actually sold or exercised. Option B is also incorrect.

Which of the Following Is Correct for the Owner of a June