SIE practice questioneasyIntrinsic value
If ABC stock is trading at $42, which 40-strike option has intrinsic value?
- AABC 45 put
- BABC 45 call
- CABC 40 put
- DABC 40 call✓ Correct answer
Explanation
Why D — ABC 40 call
A call has intrinsic value when the stock is above the strike price. Only the 40 call is in the money by $2. The other options are either out-of-the-money or at-the-money.
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