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Basic Question 1 of 18

Which of the following statements is not true?

A. After the expiration date the option becomes valuable.
B. An option is the right to buy or sell an underlying asset at the strike price.
C. Exercising an option involves buying or selling some asset.
D. The option price is the price paid to acquire the option.

User Contributed Comments 3

User Comment
gweiden It's worthless at expiration.
johnowens not true, gweiden. it's worth at expiration is its excersise value. if you have a call option to buy a stock at $20, which is trading at $30, then on expiration date its worth $10 per share.

"After Expiration", it is no longer excersisable, so it is worthless.
johntan1979 johnowens is right. It is worthless AFTER expiration, not ON or BEFORE.
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I passed! I did not get a chance to tell you before the exam - but your site was excellent. I will definitely take it next year for Level II.
Tamara Schultz

Tamara Schultz

Learning Outcome Statements

determine the value at expiration and profit from a long or a short position in a call or put option

contrast forward commitments with contingent claims

CFA® 2024 Level I Curriculum, Volume 5, Module 2.