If the price of the common stock exceeds the exercise price of a call for the holder the call is said to be
A)naked.
B)out of the money.
C)in the money.
D)covered.

Question

If the price of the common stock exceeds the exercise price of a call for the holder the call is said to be
A)naked.
B)out of the money.
C)in the money.
D)covered.

Quizplus · Accepted Answer

A call is said to be in the money when the market price of the underlying stock is above the strike price of the option. In this scenario, the holder of the call option can exercise their right to buy the stock at a lower price than the current market price, making a profit. Therefore, if the price of the common stock exceeds the exercise price of a call for the holder, the call is said to be in the money.

If the Price of the Common Stock Exceeds the Exercise