Question: A call options payoff at maturity time T is C T = max(S T K, 0). Which of the following is NOT true about this

A call options payoff at maturity time T is CT = max(ST K, 0). Which of the following is NOT true about this payoff?

Group of answer choices

The payoff is zero when the stock price at time T is less than or equal to the strike price, i.e., when ST K.

The payoff is negative when the stock price at time T is less than the strike price, i.e., when ST < K.

The payoff is positive when the stock price at time T is greater than the strike price, i.e., when ST > K.

The payoff can never be negative but the premium paid to acquire the option can be lost.

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!