A stock is selling at $85 at the expiration of an option contract.Which of the following options will most likely be exercised?
A)Buyer of a call option with exercise price of $65.
B)Buyer of a put option with exercise price of $65.
C)Buyer of a call option with exercise price of $80.
D)Buyer of a put option with exercise price of $85.

Question

Quizplus · Accepted Answer

A call option gives the buyer the right to buy the underlying stock at a specified exercise price, which in this case is $65. Since the current stock price is higher than the exercise price, the buyer of the call option would exercise their option to purchase the stock at the lower price and then immediately resell it on the market for a profit. Buyers of put options would exercise their option if the stock price falls below the exercise price, which is not the case in this scenario.

A Stock Is Selling at $85 at the Expiration of an Option