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3 years ago

A PHLX Jan 80 Swiss Franc Call contract is quoted at 2 when the Swiss Franc closes at 77. The contract is:_______

Business

1 answer:

Ulleksa [173]3 years ago

5 0

Answer:

Out the money.

Explanation:

A PHLX Jan 80 Swiss Franc Call contract is quoted at 2 when the Swiss Franc closes at 77. The contract is out the money.

An out the money ultimately implies that an option only has an extrinsic value but no intrinsic value. The extrinsic value of an option refers to the difference between its intrinsic value and the market value (premium). An extrinsic value is affected by the volatility in the market and its time value. The intrinsic value of an asset refers to the calculated, true or real value of an asset and is solely affected by internal factors.

A call is out the money when the strike price is greater than or above the underlying price of an asset. This simply means that, it's market value (price) has fallen below its strike price.

<em>In this scenario, the market price of the call is 77 while its strike price is 80; thus, the call option is out the money by 3.</em>

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