A call option is said to be in the money if
A)it is written on a Treasury bill or other money-market asset.
B)it has increased in price since it was first written.
C)the price of the underlying asset is currently greater than the strike price.
D)the price of the underlying asset is currently greater than the strike price plus the option premium.

Question

Quizplus · Accepted Answer

A call option is in the money when the current price of the underlying asset is greater than the strike price. This means that if the option holder were to exercise the option, they would be able to buy the asset at a lower price (the strike price) than what it is currently worth on the market. Therefore, the option has real value and is considered in the money. The other choices are incorrect. A call option can be written on various assets, not just money-market assets (A). The increase in price of the option itself does not determine whether it is in the money (B). The option premium is already factored into the strike price, so it does not need to be added back in (D).

A Call Option Is Said to Be in the Money