A stock currently sells for £75 per share. A call option on the stock with an exercise price £70 currently sells for £5.50. The call option is
A) at-the-money.
B) in-the-money.
C) out-of-the-money.
D) at breakeven.
E) none of the above.

Question

Quizplus · Accepted Answer

The strike price of the call option is £70, which is lower than the current stock price of £75. This means that the call option is in-the-money, as exercising the option would allow the holder to buy the stock at a lower price and immediately sell it for a profit.

A Stock Currently Sells for £75 Per Share