Question

When the existing spot rate exceeds the exercise price, a call option is ____, and a put option is ____. Group of answer choices out of the money; in the money out of the money; out of the money in the money; in the money in the money; out of the money

Answer 1

Answer:

in the money; out of the money.

Explanation:

Secondary market can be defined as a market where various investors sell and buy securities from other investors.

Some examples of secondary market around the world are New York Stock Exchange (NYSE), NASDAQ, London Stock Exchange (LSE) and National Stock Exchange (NSE).

On the other hand, the primary market refers to the market where these securities that are being sold are issued or created.

In trading and investment, a stock option can be defined as a contract that states that the buyer as the right to buy (call) or sell (put) an asset at a particular price at any time but necessarily obligational. Thus, it is strictly at the discretion of the buyer (investor).

Generally, in a long (buy) position, a buyer hopes that the price of stocks will rise because he or she will typically profit from a rise in price.

However, a short (buy) position, a buyer hopes that the price of stocks will fall because he or she will typically profit from a fall in price.

A spot rate is the cash or exchange rate placed on a contract in the stock exchange market.

When the existing spot rate exceeds the exercise price, a call option is in the money, and a put option is out of the money.