When Is an Option In-The-Money

question 21

Essay

When is an option in-the-money?

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Definitions:

Common Stock

A form of corporate equity ownership, a type of security representing ownership in a corporation.

Market Price

The rate at which an asset or service is exchanged in a competitive marketplace.

Marginal Tax Rate

The tax rate incurred on an additional dollar of income, reflecting the rate applicable to the highest portion of an individual's or corporation's income.

Capital Structure

The mix of different forms of external financing a firm uses, such as debt, equity, and other securities, to fund its operations and growth.