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Basic Question 17 of 18
When is the intrinsic value of a call option negative?
B. When the stock price (ST) is less than the exercise price (X)
C. When the stock price (ST) is equal to the exercise price (X)
D. Never
A. When the stock price (ST) is greater than the exercise price (X)
B. When the stock price (ST) is less than the exercise price (X)
C. When the stock price (ST) is equal to the exercise price (X)
D. Never
User Contributed Comments 13
| User | Comment |
|---|---|
| vadimmuchnik | very tricky, thanks for heads up! |
| surob | Agreed. Tricky one |
| krisscfa | Good one |
| TammTamm | Extremely tricky |
| rfvo | Yip, keep em coming!! N1 |
| magicchip | shheeeesh.. gotta read the question. good one. |
| group | Intrinsic value cannot be negative - by definition |
| mrushdi | For the writer it can be negative. |
| Shammel | Great Question! |
| endurance | marvelous question, indeed! |
| johntan1979 | OWH! Right... thanks to this question, I won't fall for the same trick again if it comes out in the exam. |
| jonan203 | it is impossible to have a negative value with this formula. Call = Max(X-ST, 0) where: X = Strike ST = stock price |
| Inaganti6 | 2MRUSHDI short call was not mentioned ! |
You have a wonderful website and definitely should take some credit for your members' outstanding grades.
Colin Sampaleanu
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.