A stock currently sells for $150 per share. A call option on the stock with an exercise price of $155 currently sells for $2.50. The call option is
A) at-the-money.
B) in-the-money.
C) out-of-the-money.
D) at breakeven.
E) above-the-money.

Question

Quizplus · Accepted Answer

An option is in-the-money if exercising the option results in a profit for the holder. On the other hand, an option is out-of-the-money if exercising the option results in a loss for the holder. In this case, the exercise price ($155) is higher than the current stock price ($150), so exercising the option would result in a loss. Therefore, the call option is out-of-the-money.

A Stock Currently Sells for $150 Per Share