Question

In: Finance

An option is said to be “in‐the‐money” if its value is positive. True or False

  1. An option is said to be “in‐the‐money” if its value is positive. True or False

Solutions

Expert Solution

Sol:

An option is said to be “in‐the‐money” if its value is positive is True.

Answer is True.

Option can be call or put option. If the price of the underlying stock is above the strike price of call option, then the option is in the money and will have a positive value. If the price of the underlying stock is below the strike price of call option, then the option is out of the money and will have a negative value. The price of an option bought will never have a negative value.

On the other hand if the price of the underlying stock is below the strike price of put option, then the option is in the money and will have a positive value. If the price of the underlying stock is above the strike price of put option, then the option is out of the money and will have a negative value.

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

A positive profitability index indicates a positive net present value. True or False
A positive profitability index indicates a positive net present value. True or False
True or False? An r value of 0.5 indicates a positive moderate correlation.
True or False? An r value of 0.5 indicates a positive moderate correlation.
An American option may be exercised only at maturity. True or false? True False
An American option may be exercised only at maturity. True or false? True False
The option writer determines when/if an option is exercised. True or False?
The option writer determines when/if an option is exercised. True or False?
true or false (1) when an investment projecthas a positive net present value (NPV), it has...
true or false (1) when an investment projecthas a positive net present value (NPV), it has an internal rate of return (IRR) that is higher than the discount used in the NPV calculations. (2) most businesses undertake more than one investment project at a time. this reduces the risk to equity investors in the company. is this last statement true or false? (3) When deutsche bank was told by the US government that it would need to pay $14 billions...
true or false (1) when an investment projecthas a positive net present value (NPV), it has...
true or false (1) when an investment projecthas a positive net present value (NPV), it has an internal rate of return (IRR) that is higher than the discount used in the NPV calculations. (2) most businesses undertake more than one investment project at a time. this reduces the risk to equity investors in the company. is this last statement true or false? (3) When deutsche bank was told by the US government that it would need to pay $14 billions...
True or False? Short Call Option provides the option (not the obligation) to sell the underlying...
True or False? Short Call Option provides the option (not the obligation) to sell the underlying asset for the strike price at maturity.” Explain your answer with example(s). True or False? Long Put Option provides the option (not the obligation) to sell the underlying asset for the strike price at maturity.” Explain your answer with example(s).
Explain each of the determinants of the value of a call option? Is there a positive...
Explain each of the determinants of the value of a call option? Is there a positive or negative relationship between this determinant and the value of a call option?
1. True or False: A correlation of 1.0 implies a perfect positive correlation. 2. True or...
1. True or False: A correlation of 1.0 implies a perfect positive correlation. 2. True or False: The fact that two variables are correlated does not mean that one causes the other. 3. True or False: The value of the correlation (r) between X and Y does not change if all values of X are multiplied by 100. 4. True or False: The Covariance between two variables has a range from -1.0 to 1.0. 5. True or False: A correlation...
Based on the confusion matrix what would be the answer? True Positive equals 40, false positive...
Based on the confusion matrix what would be the answer? True Positive equals 40, false positive equals 30, false negative equals 10, true negative equals 60
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT