OPTIONS CAN BE IN THE MONEY, OUT OF THE MONEY, OR AT THE MONEY - SIE CANDIDATES MUST KNOW AND UNDERSTAND THE DIFFERENCES

The Securities Industry Essentials (SIE) Exam asks questions regarding options. FINRA's Content Outline for the SIE Exam includes questions on options in Section 2.1.3, including questions on when an option is "in the money," "out of the money," or "at the money."

Bob Eder discusses Options and their characteristics in his Study for the Securities Industry Essentials Exam. Here is a sample of Bob Eder's treatment:

"When Options Are "In the Money" (2.1.3)

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 SIE Exam. See the references to Options, "in the money," "out of the money," or "at the money" in FINRA's Content Outline, in the Options Section 2.1.3.

Study for the Securities Industry Essentials (SIE) Exam is available from Amazon in both paperback and Kindle e-book versions. Here is the link to Bob Eder's book on Amazon.

For questions about Bob Eder's Study for the Securities Industry Essentials (SIE) Exam, or questions in general about the SIE exam, or about Options, 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. See Bob Eder's Author Page on Amazon.com.

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