Products & Their RisksQuestion 90 of 398
When the market price of the underlying stock exactly equals the strike price, both a call and a put on that stock are said to be:
a.At-the-money, with zero intrinsic value
b.In-the-money, with full intrinsic value
c.Automatically exercised
d.Worthless and delisted
Explanation
An option is at-the-money when the underlying market price equals the strike price. In that case the option has no intrinsic value; any premium is entirely time value. Both calls and puts on the same underlying are at-the-money simultaneously when price equals strike.
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