SIE practice questionmediumOptions - Intrinsic Value
A stock is trading at $55. Which of the following has the greatest intrinsic value?
- AA call with a $50 strike price✓ Correct answer
- BA call with a $60 strike price
- CA put with a $50 strike price
- DA put with a $55 strike price
Explanation
Why A — A call with a $50 strike price
A $50 call has $5 of intrinsic value ($55-$50). Calls with higher strikes and puts are either out-of-the-money or at the money in this scenario, so A is correct.
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