It Is May and You Own a June Call on ABC

question 25

Multiple Choice

It is May and you own a June call on ABC Corp.with an exercise price of $50.The option trades at $40 and ABC is trading at $86.What should you do?

• A) Exercise the option now and take the profits.
• B) Buy the stock of ABC Corp because option traders seem to be optimistic about its prospects.
• C) Sell your ABC stock before its price declines.
• D) Sit and wait until the June expiration.

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