Gordon Is Considering Purchasing Either a Call or a Put

question 57

Multiple Choice

Gordon is considering purchasing either a call or a put option on XYZ stock. Each of the options has an exercise price of $40 and XYZ is trading at $44.50 per share. Which of the following statements about the options is correct?

• A) The put option is in the money, whereas the call option is out of the money.
• B) The call option is in the money, whereas the put option is out of the money.
• C) Both the put and the call option are in the money.
• D) Both the put and the call option are out of the money.

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Definitions:

All-Or-None Response

A principle that states that nerve or muscle fibers respond to stimuli at their threshold with a complete response or not at all.

Stimulus

Anything that can invoke a physiological response or reaction from an organism or a cell.

Voltage-Gated Channels

Protein channels in cell membranes that open or close in response to changes in electrical voltage, crucial for nerve impulse transmission.

Depolarization

The process by which a cell's membrane potential becomes less negative, moving towards a more positive charge, typically initiating an action potential.