or giving someone else the right to buy the stock. The investor collects the option premium and hopes the option expires worthless (below strike price). This strategy generates additional income for the investor but can
If the stock is below the strike price, the option is out of the money (OTM). You can still buy the stock, but it’d be pointless to do so, since you could buy it for less than that in the open market. If the stock doesn’t rise above the strike price by the time the option...
For example, suppose ABC Company’s stock is selling at $40 and a call option contract with a strike price of $40 and an expiry of one month is priced at $2. The buyer is optimistic that the stock price will rise and pays $200 for one ABC call option with a strike price of $40...
When traders expect the price to move up, they can take a long position in the call option. Investors pay a premium to buy a long call option, and they do so in the expectation of improved profits. However, if the price drops below the strike price, the option holders lose the premium...
Of course, once you exercise the options, you have to pay for the stock at the strike price—$50 in this case. But you would do so only if the stock price had risen high enough for the option to bein the money—a term that implies an option is worth exercising because the stock pr...
Out-of-the money calls: When the stock price falls below the strike price, making the option exercise futile as the shares are more expensive to buy. Note If the price doesn't rise above the strike price, the buyer won't exercise the option. The only loss is the premium. That’s ...
3) If the stock price is above the strike price of the option, your stock will be bought from you at the strike price of the option, this is called assignment or exercising the option. 4) If the stock price is below the strike price of the option, the option expires worthless, the ...
When the option is in the money or above the breakeven point, the option value or upside is unlimited because the stock price could continue to climb. If the stock trades below the strike price, the option is out of the money and becomes worthless. Then the option value flatlines, capping...
Answer to: A call option with a strike price of $54 on a stock selling at $61 costs $8.6. What are the call option's intrinsic and time values? By...
1A European stock index call option has a strike price of 1,160 and a time to expiration of 0.25 years. Given a risk-free rate of 4 percent, if the underlying index is trading at 1,200 and has a multiplier of 1, then the lower bound forthe option price is closest to:[单选题...