If a Stock Option Is "Underwater" What Does That Mean

question 264

Multiple Choice

If a stock option is "underwater" what does that mean?

• A) The company has experienced flood damage to its facilities and cannot pay off on any stock options.
• B) The federal government has blocked the company from paying off stock options.
• C) The market price of the stock that the option applies to is lower than the option price.
• D) The market price of the stock that the option applies to is higher than the option price.
• E) The person holding the stock option will not exercise it because it would constitute poor public relations (the option is therefore "underwater" and out of sight).