A call option will have the highest value when the stock price is:
A) far above the strike price.
B) closest to the strike price.
C) approaching zero.
D)less than the strike price.

Question

Quizplus · Accepted Answer

A call option gives the holder the right but not the obligation to buy a stock at a predetermined price (strike price) before a specified expiration date. As the stock price increases, the value of the call option also increases as the holder has the opportunity to buy the stock at a lower price than the current market value. Therefore, the highest value of a call option would be when the stock price is far above the strike price, giving the holder the potential for the greatest profit.

A Call Option Will Have the Highest Value When the Stock