Question

At contract maturity the value of a call option is ___________, where X equals the option's strike price and ST is the stock price at contract expiration.

a. max (0, ST - X)
b. min (0, ST - X)
c. max (0, X - ST)
d. min (0, X - ST)

Answer 1

A. Max (0, ST - X)

Step-by-step explanation:

call option which is also known as a "call", can be regarded as a contract, that exist between both buyer as well as the seller of the call option, in so that security exchange at a set price can occur. It should be noted that At contract maturity the value of a call option is Max (0, ST - X) where X equals the option's strike price and ST is the stock price at contract expiration.