- CFA Exams
- CFA Level I Exam
- Topic 7. Derivatives
- Learning Module 46. Basics of Derivative Pricing and Valuation
- Subject 8. Factors that Affect the Value of an Option

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**CFA Practice Question**

All of the following statements about the value of a call option at expiration are true EXCEPT ______

A. the value of the long position equals zero or the stock price minus the exercise price, whichever is higher.

B. the value of the long position equals zero or the exercise price minus the stock price, whichever is higher.

C. the short position in the same call option has a zero value for all stock prices equal to or less than the exercise price, and can result in a loss if the stock price exceeds the exercise price.

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**User Contributed Comments**
3

User |
Comment |
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miso |
Why is the last statement correct? Short call option is in the money when underlying price is below strike, therefore short position in call option has value |

Terry |
remember the formula CT=ST-X? if ST ,which is the Stock Price, is less than or equal to X, which is the Exercise Price, the CT (Call Option Value) will either be negative or zero. And since options could not be valued as negative, we carry them as zero. |

alishahzad |
how is B false? |