Question

For a European option, if the stock price on the expiration day is higher than the strike price, we call it

	A.	“in the money” if it is a put option
	B.	“at the money” if it is a call option
	C.	“at the money” if it is a put option
	D.	“out of the money” if it is a put option
	E.	“out of the money” if it is a call option

Answer 1

If the current market price of a stock is trading higher than the strike price of stock, and if investor is holding put options it will be said as out of the money put options this is such because this option cannot be exercised since the current market price is way higher than the strike price of the put option. For call options,it would be option which is trading at premium.

So for put options, it would not be a scenario where option would be trading in the money ,or at the money, it would be scenario where the put option is out of the money.

It would neither be a call option which is in the money or out the money because the current market price is higher than the strike price so it would be call option trading at premium.

So the correct option would be option(D) out of the money if it is a put option.