Question

Consider a call option with an exercise price of $40 and an

expiration date in December and a put option with an exercise

price of $40 and an expiration date also in December, both on a

stock that is currently selling for $37 per share. Calculate how

much these options are in or out of the money

Answer 1

Hello Sir/ Mam

YOUR REQUIRED ANSWERS ARE:

• Call Option- Out of the money - $3
• Put Option - In the Money - $3

Given that the stock is currently selling for $37 per share.

A call option with an exercise price of $40 is out of the money(slightly)[$40-$37 = $3] as exercise price is more than the Current Market Price.

A put option with an exercise price of $40 is in of the money(slightly)[$40-$37 = $3] as exercise price is less than the Current Market Price.

I hope this solves your doubt.

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