If the Owner of a Call Option with a Strike

question 26

Multiple Choice

If the owner of a call option with a strike price of $35 finds the stock to be trading for $42 at expiration, then the option:

• A)Expires worthless
• B)Will not be exercised
• C)Is worth at least $7 per share
• D)Cost too much initially

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Definitions:

Dividend

A portion of a company's earnings distributed to its shareholders, typically in the form of cash or additional shares.

Cash Settlement

The provision of some futures contracts that requires not delivery of the underlying assets but settlement according to the cash value of the asset.

Stock Index Futures

Financial contracts that obligate the buyer to purchase or the seller to sell a stock index at a predetermined price on a specified future date.

Delivery

The process of transporting goods from a seller to the purchaser's designated location, or the act of fulfilling an obligation or promise.