Question

An investor paid $10 for an option that is currently in-the-money $5. If the underlying is priced at $90, which of the following best describes that option?

A. Call Option with an exercise price of $80

B. Call option with an exercsie price of $95

C. Put option with an exercise price of $95

Answer 1

In call option, option is in the money when Underlying price is more than excercise price and in Put option, Option is in the money when underlying price is less than excercise price.

Option in the money Value = $5.

Excercise price = $90.

So, in call option underlying price = $90 + $5

= $95

So, in call option underlying price should be $95.

So, in Put option underlying price = $90 - $5

= $85.

So, in put option underlying price should be $85.

So, Option (C) is correct answer.