CFA Practice Question

CFA Practice Question

Consider a call option with an exercise price of $105 on a stock that is worth $95. Calculate the moneyness of the option.
A. the call is $10 in the money
B. the call is $10 out of the money
C. none of these answers.
Explanation: A call option is out of the money when the exercise price exceeds the stock price. In this example, the call is $10 out of the money.

User Contributed Comments 5

User Comment
jpducros sometimes there is an easy question...just to fill up your ego...
amyjones What about the cost of the option?
chester21 Agree with AmyJones - The cost of the option premium should be include....
nike When calculating moneyness of an option you should simply use formula exercise price - stock price. No option cost is needed (it's a sunk cost - you already have the option).
thebkr7 These questions make me feel smart...

Too bad there's only 1 in 240
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