You know that a call will finish in the money. Based on that single piece of information, you also know which one of the following?
A)The stock price will equal the strike price at expiration.
B)The risk-free rate is zero.
C)A put on the same underlying asset with the same strike and expiration will finish out of the money.
D)The strike price will exceed the stock price at expiration.
E)The price of the call is equal to the price of the put.

Question

Quizplus · Accepted Answer

If a call option finishes in the money, it means the underlying asset's price has risen above the strike price. Therefore, a put option with the same strike and expiration would finish out of the money, as the put would only be profitable if the underlying asset's price fell below the strike price. Knowing that the call will finish in the money does not give any information about the stock price equaling the strike price, the risk-free rate, the strike price exceeding the stock price at expiration, or the prices of the call and put options being equal.

You Know That a Call Will Finish in the Money