You Wrote a $40 Call Option on a Stock That

question 36

Multiple Choice

You wrote a $40 call option on a stock that has a market price of $43. Which one of the following statements must be correct if the option expires three months from now?

• A)Your option currently has zero intrinsic value.
• B)Your option currently has a negative payoff.
• C)You have the right to purchase shares at $40 a share.
• D)Your option payoff will increase if the market price of the stock increases.
• E)If the market price remains stable, you will make the decision to exercise this option prior to expiration.