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 $85
D) Buyer of a put option with exercise price of $85

Question

Quizplus · Accepted Answer

The buyer of a call option with an exercise price of $65 has the right to buy the stock at $65, which is cheaper than the current market price of $85. Therefore, there is a chance that the buyer would exercise the option to buy the stock at $65 and sell it in the market for a profit of $20. The other options are less likely to be exercised as they are either at the current market price (Option C) or above it (Option B and D).

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