Final Answer:
The November $27.50 call option on Daronco stock, with zero intrinsic value on August 15, is considered out of money. Thus the corrcet option is c.
Step-by-step explanation:
An option's intrinsic value is the difference between the current stock price and the strike price. When the call option has zero intrinsic value, it means the current stock price of Daronco is below the strike price of $27.50. As a result, the option is out-of-the-money (OTM) because exercising it wouldn't yield a profit at the current market price.
The absence of intrinsic value suggests that the stock price hasn't reached a level where the option holder could benefit from executing the option.
In such cases, the option derives its value entirely from time decay and implied volatility, and unless the stock price rises above the strike price before expiration, the option might expire worthless.
Therefore, the corrcet option is c.
Complete Question
Assume you own a November $27.50 call on DaronCo stock. Today is August 15 and the call has zero intrinsic value. Which one of the following best describes this option?
a. At the money
b. Worthless
c. Out of the money
d. In the money
e. Unfunded