Final answer:
Nicole has chosen to purchase her 100 shares of Apple stock by exercising her call option. This means she will pay the strike price agreed upon when she bought the option to acquire the shares.
Step-by-step explanation:
Nicole owns a call option on 100 shares of Apple stock. When she decides to purchase the Apple shares using her option, she is said to exercise the option. The correct answer to the multiple-choice question is C. Exercise the option.
Exercising an option means that the holder of the option chooses to use their right to buy (in the case of a call option) or sell (in the case of a put option) the underlying asset at the predetermined price, known as the strike price, before the expiration date. In Nicole's case, by exercising her call option, she pays the strike price and purchases 100 shares of Apple stock, regardless of the current market price.
Nicole, as the owner of a call option on 100 shares of Apple stock, has the right, but not the obligation, to purchase those shares at a predetermined price called the strike price. By deciding to purchase the Apple shares, Nicole is exercising the option. Option holders typically exercise their options if the market price of the underlying asset is higher than the strike price, allowing them to buy the asset at a lower price and potentially profit from the difference.