SIE practice questioneasyCall options
An investor buys a call option with a $50 strike price when the stock is trading at $55. What is the option's intrinsic value?
- A$55
- B$0
- C$50
- D$5✓ Correct answer
Explanation
Why D — $5
A call option’s intrinsic value is the amount by which the stock price exceeds the strike price ($55 - $50 = $5). The other options either ignore the calculation (B) or simply state the strike or market price, which are unrelated by themselves.
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