When the exercise price of a call option is lower than the current share price, the option is said to be
A)at-the-money.
B)in-the-money.
C)out-of-the-money.
D)None of the above.

Question

Quizplus · Accepted Answer

When the exercise price of a call option is lower than the current share price, it means that the call option has intrinsic value and can be exercised to buy the stock at a lower price than its current market value. This is known as being "in-the-money". Option A is incorrect because "at-the-money" refers to a call option where the exercise price is equal to the current share price. Option C is incorrect because "out-of-the-money" refers to a call option where the exercise price is higher than the current share price. Therefore, the best choice is B.

When the Exercise Price of a Call Option Is Lower