Strike Price

A is correct. The call option is in-the-money because the market price ($82) exceeds the strike price ($75), giving it $7 of intrinsic value ($82 - $75 = $7). The put option is out-of-the-money because the market price ($82) is above the strike price ($70), so exercising the right to sell at $70 when the market is at $82 would result in a loss. Out-of-the-money options have zero intrinsic value.

B is incorrect because it reverses the relationships. A call is in-the-money when market > strike (which is true here), and a put is in-the-money when market < strike (which is false here since $82 > $70). C is incorrect because at-the-money means the market price equals the strike price, which is true for neither option ($82 ≠ $75 and $82 ≠ $70). D confuses strike price with intrinsic value. Intrinsic value is calculated from the relationship between strike and market price, not the strike price alone.

B is correct. The strike price (also called exercise price) is the predetermined, fixed price established when the option contract is created. It remains constant throughout the option's life and determines the price at which the holder can buy (call) or sell (put) the underlying security if they choose to exercise.

A is incorrect because the strike price and market price are distinct. When an option is purchased, the strike price may be above, below, or equal to the current market price, but it is set by the exchange based on standardized intervals, not determined by the market price. C is incorrect because strike price never changes once the contract is created. While option premium (price of the option) changes based on market conditions, volatility, and time, the strike price is fixed. D confuses strike price with premium. The premium is the cost to buy the option; the strike price is the exercise price written into the contract.

B is correct. Calculate put option intrinsic value: Strike Price - Market Price = $90 - $78 = $12. The put option is in-the-money because the market price ($78) is below the strike price ($90), giving the holder the valuable right to sell at $90 when the market is only at $78. This $12 difference is the intrinsic value.

A is incorrect because this put is clearly in-the-money (market < strike for puts), not out-of-the-money. A put is only out-of-the-money when market price exceeds strike price. C ($78) is simply the current market price and has nothing to do with intrinsic value calculation. D ($90) is the strike price itself, not the intrinsic value. Intrinsic value measures the profit from immediate exercise, not the strike price alone.

C is correct (the EXCEPT answer). This statement is FALSE. The strike price never adjusts or changes once the option contract is created. It is a fixed contractual term that remains constant regardless of market price movements. This fixed nature is fundamental to how options work: the holder has the right to transact at the strike price no matter where the market moves.

A is accurate: strike price is indeed set at contract creation and never changes. This fixed exercise price is what gives options their leverage and profit potential as the underlying security's market price fluctuates. B is accurate: a call option gives the right to buy at the strike price, so it has value (is in-the-money) when the market price is higher than the strike price. D is accurate: exchanges standardize strike prices at regular intervals ($2.50 for stocks under $25, $5 for stocks $25-$200, $10 for stocks over $200) to create liquid, fungible option contracts.

D is correct. All four statements are accurate.

Statement 1 is TRUE: The call is in-the-money because market price ($68) exceeds strike price ($60). Intrinsic value = $68 - $60 = $8.

Statement 2 is TRUE: For a call option, breakeven at expiration = strike price + premium = $60 + $10 = $70. At $70, the $10 gain from exercise ($70 market - $60 strike) exactly offsets the $10 premium paid, resulting in breakeven.

Statement 3 is TRUE: If GHI rises to $75, intrinsic value = market - strike = $75 - $60 = $15. Intrinsic value increases dollar-for-dollar as the underlying stock price rises when the option is in-the-money.

Statement 4 is TRUE: Option premium consists of intrinsic value plus time value. Time value = premium - intrinsic value = $10 - $8 = $2. This $2 represents the market's valuation of the remaining time until expiration and the possibility of further price increases.