True or False - If a stock\'s price is above the strike price of a call option w
ID: 2656831 • Letter: T
Question
True or False - If a stock's price is above the strike price of a call option written on the stock, then the exercise value is equal to the stock minus the strike price. If the stock price is below the strike price, the exercise value of the call option is zero. True or False - If a stock's price is above the strike price of a call option written on the stock, then the exercise value is equal to the stock minus the strike price. If the stock price is below the strike price, the exercise value of the call option is zero.Explanation / Answer
True.
A call option will be exercised when the stock price is higher than the strike price. So the value of the option for the buyer will be = stock price - strike price
A call option will not be exercised when the stock price is lower than the stike price. So that value of the option for buyer will be = 0
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