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Basic Question 1 of 18
Which of the following statements is not true?
B. An option is the right to buy or sell an underlying asset at the strike price.
C. Exercising an option involves buying or selling some asset.
D. The option price is the price paid to acquire the option.
A. After the expiration date the option becomes valuable.
B. An option is the right to buy or sell an underlying asset at the strike price.
C. Exercising an option involves buying or selling some asset.
D. The option price is the price paid to acquire the option.
User Contributed Comments 3
| User | Comment |
|---|---|
| gweiden | It's worthless at expiration. |
| johnowens | not true, gweiden. it's worth at expiration is its excersise value. if you have a call option to buy a stock at $20, which is trading at $30, then on expiration date its worth $10 per share. "After Expiration", it is no longer excersisable, so it is worthless. |
| johntan1979 | johnowens is right. It is worthless AFTER expiration, not ON or BEFORE. |
I am using your study notes and I know of at least 5 other friends of mine who used it and passed the exam last Dec. Keep up your great work!
Barnes
Learning Outcome Statements
determine the value at expiration and profit from a long or a short position in a call or put option
contrast forward commitments with contingent claims
CFA® 2024 Level I Curriculum, Volume 5, Module 2.