SIE practice questionmediumOptions—Intrinsic vs. Time Value
A call option is 'in the money' when:
- AMarket price is above the strike price✓ Correct answer
- BMarket price is below the strike price
- CIt is at expiration
- DThe premium equals the strike price
Explanation
Why A — Market price is above the strike price
A call is in the money when the current market price exceeds the strike price. Below the strike is out of the money. Expiration relates to time value. Premium and strike price are unrelated.
Turn it into reps
Reading one answer is not the same as being ready
Lucky the Banker is a free practice app with 1,867+ SIE questions, weak-area tracking, and timed mock exams. No credit card, no paywall.
Related Options questions
- If an option's premium is $5, its intrinsic value is $3, what is its time value?
- An investor expects a stock’s price to decline. Which options strategy would best take advantage of this forecast?
- An investor writes a put option. If exercised, their obligation is to:
- An investor buys a call option. What right does this give the investor?