Question

Q)a
call option is at the money if the market price and exercise price
are the same in this case

1)the option may be exercised

2)option may not be exercised

Answer #1

**Solution:-**

A call option gives a right but not an obligation to the option buyer to buy the underlying security at the strike price. Whether the option price is in the money or not, it is still the right of the optionholder to exercise his option if he wants.

Offcourse, it is theoretical as an optionholder would want to exercise only if the option is in the money, however, it is still the right of an option holder to call his broker and exercise his option even if it at the money or out of money.

Therefore, the correct option is option 1- The option may be exercised

Which of the following is FALSE
A In the Money Call: exercise price < asset price
B. In the Money Put: exercise price < asset price
C. Out of the Money Call: asset price < exercise price.
D. Out of the Money Put: asset price > exercise price.
E. At the Money Option: exercise price = asset price

You bought a call option on July 27,
2020 at the exercise price of $65. It expires on October 26, 2020.
The stock currently sells for $66., while the call option sells for
$6.
A stock that is currently selling
for $47 has the following six-month options
outstanding:
Strike Price
Market Price
Call Option
$45
$4
Call Option
$50
$1
Which option(s) is (are) in the money?
Which option(s) is (are) at the money?
Which option(s) is (are) out of...

A call option with exercise price of $120 is priced at $3, the
underlying security price is $125. At the same time, a put option
for the same underlying security with the same exercise price and
maturity, is price at $3. Assume both options are of American
style. Which of the following most likely to be correct?A.Both
options are overpriced. B. The call option is underpriced. C. The
put option is overpriced.D. Both options are underpriced. E. None
of the...

Assume you are looking at a call option on Bristol Cities Inc.
with an exercise price of $104. Current stock price today is $102
and the option has a premium of $3. What will be the profit or loss
earned by the speculator at prices of $101, $104 and $112 just
before time of expiry? Assume the option will not be exercised
until maturity.

Citigroup buys a call option
on euros (contract size is €600,000) at a premium of $0.02 per
euro. If the exercise price is $1.44/€ and the spot price of the
euro at date of expiration is $1.48/€,
A. Will this option be exercised, that is, is in-the-money
or out-of-the-money? Why? (2 points)
B. What is Citigroup's profit (or loss) on the call
option? (3 points)

An investor purchases a call option with an exercise price of
$66 for $3.60. The same investor sells a call on the same asset
with an exercise price of $71 for $2.40. At expiration, 3 months
later, the asset price is $68.75. All other things being equal and
given a continuously compounded annual interest rate of 4.2%, what
is the profit to the investor?

Suppose you bought a call option for $3 with an exercise price
of $50 and another call option for $2 with an exercise price of $60
per share. Draw a graph of the payout on the investment as a
function of the stock price. Label the graph.

A stock is currently selling for $60 per share. A call option
with an exercise price of $65 sells for $3.71 and expires in three
months. If the risk-free rate of interest is 2.9 percent per year,
compounded continuously, what is the price of a put option with the
same exercise price?

A stock is currently selling for $60 per share. A call option
with an exercise price of $67 sells for $4.49 and expires in four
months. If the risk-free rate of interest is 2.7 percent per year,
compounded continuously, what is the price of a put option with the
same exercise price?

A stock is currently selling for $81 per share. A call option
with an exercise price of $83 sells for $4.05 and expires in three
months. If the risk-free rate of interest is 3 percent per year,
compounded continuously, what is the price of a put option with the
same exercise price? (Do not round intermediate calculations and
round your answer to 2 decimal places, e.g., 32.16.)
Put price $

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