You purchased a call option for a premium of $4.The call has an exercise price of $29 and is expiring today.The current stock price is $31.What would be your best course of action?
A) Exercise the call because the stock price is greater than the exercise price.
B) Do not exercise the call because the stock price is greater than the exercise price.
C) Do not exercise the call because the difference between the exercise price and the stock price is not enough to cover the amount of the premium.
D) Exercise the call to get a positive net return on the investment.
E) Do not exercise the call to avoid a negative net return on the investment.

Question

Quizplus · Accepted Answer

Since the current stock price is higher than the exercise price, exercising the call option would allow the investor to purchase the stock at a lower price than the current market price. Therefore, the best course of action would be to exercise the call option and realize the gain. The premium paid for the option would be added to the exercise price and the stock could then be sold in the market for a profit.

You Purchased a Call Option for a Premium of $4