When the existing spot rate exceeds the exercise price, a call option is ____, and a put option is ____.
A) out of the money; in the money
B) out of the money; out of the money
C) in the money; in the money
D) in the money; out of the money

Question

Quizplus · Accepted Answer

A call option is "in the money" when the spot rate (current market price) is higher than the exercise price, as it allows the holder to buy at a lower price. Conversely, a put option is "out of the money" in this scenario because it would allow the holder to sell at a lower price than the current market rate.

When the Existing Spot Rate Exceeds the Exercise Price, a Call