We appreciate your visit to MCQ Which of the following statements is true A an at the money European put option can be exercised at any time before expiration day. This page offers clear insights and highlights the essential aspects of the topic. Our goal is to provide a helpful and engaging learning experience. Explore the content and find the answers you need!
Answer :
The correct statement is:
B: an in-the-money European call option can be exercised on expiration day.
Is it possible to exercise an in-the-money European call option on the expiration day?
In European options, the right to exercise the option is only available on the expiration day.
An in-the-money call option means the strike price of the option is lower than the current market price of the underlying asset.
If the call option is in-the-money at expiration, the option holder can choose to exercise the option and buy the underlying asset at the predetermined strike price.
On the other hand, an at-the-money European put option (A) can only be exercised on expiration day, not before. It gives the holder the right to sell the underlying asset at the strike price, but only if the option is in-the-money at expiration.
Therefore, statement B is true as in-the-money European call options can be exercised on expiration day, while statement A is false as at-the-money European put options cannot be exercised before the expiration day.
Learn more about expiration day
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