Question

Mr. A bought an ABC July 90 call option for $7. Ms. B bought an ABC July 95 call option for $2.5625. Mr. C bought an ABC July 95 put option for $0.6875. Ms. D bought an ABC July 100 put option for $3.50. If the stock price of ABC at the option’s expiration date is $95, then a complete list of those who will exercise their options is

Mr. B and Mr. C
Ms. A and Mr. D
Ms. B, Mr. C and Ms. D
Mr. A, Ms. B and Ms. D

Answer 1

call option means people who are long on the stock and wants share to rise whereas put option means people want the share to fall.

If there has to expirry at 95,only those options which will get exercised will be a call option of 90 and put option of 100 will both get exercise.

A call option of 95 and put option of 95 are at the money options and there would not be any profit on exercising them because there would always be the loss of premium paid.

Correct answer is option( B)Ms. A and Mr. D