OPTIONS CAN BE IN-THE-MONEY, OUT-OF-THE-MONEY, OR AT-THE-MONEY - SERIES 6 CANDIDATES MUST KNOW AND UNDERSTAND THE DIFFERENCE

The Series 6 Exam asks questions regarding Options and their Characteristics. FINRA's Content Outline for the SIE Exam includes Options in Section 3.2, and Option Characteristics, such as when options are "in-the-money," "out-of-the-money," or "at-the-money."

Bob Eder discusses Options and their Characteristics in his Study for the Series 6 Exam. Here is a sample of Bob Eder's treatment:

"When Options Are "In the Money" (3.2)

A call option is in-the-money when the stock price is above the strike price of the call.

A put option is in-the-money when the stock price is below the strike price of the put.

"EXAMPLE #1

Johnny purchases three calls XYZ June 60 for three when XYZ stock is at 62. This call is in the money because the stock price (62) is higher than the strike price of XYZ call (60).

 

"EXAMPLE #2

Joan purchases one put ABC Aug 50 for four when ABC stock is at 49. This put is in the money because ABC stock price (49) is below the strike price of ABC put (50).

 

"EXAMPLE #3

Henry writes four calls DFG Sept 35 for a premium of two. The price of DFG shares is at 35. These DFG calls are at the money, or on the money.

Here is the link to FINRA's Content Outline for the Series 6 Exam. See the references to Options and their Characteristics in FINRA's Content Outline, Section 3.2.

Study for the Series 6 Exam is available from Amazon in both paperback and Kindle e-book versions. Here is the link to Bob Eder's Series 6 Exam study manual on Amazon.

See Bob Eder's Author Page on Amazon.com.

For questions about Bob Eder's Study for the Series 6 Exam, or questions in general about the Series 6 exam, such as Options and their Characteristics, feel free to email Bob Eder at bobeder@bobeder.net.

Bob Eder received his Juris Doctor (J.D.) degree from the University of Utah, Quinney College of Law, in 2001.