Strike price is the price at which you can exercise your option. "In the money" means exercising would be profitable now. "Out of the money" means it wouldn't. Time value erodes daily as expiration approaches.
Answer: $160. A call is in-the-money when the stock price is ABOVE the strike ($160 > $150 means you can buy cheap and profit).
Answer: The loss of option value as expiration approaches. Theta measures time decay — options lose value daily as expiration nears, hurting buyers and helping sellers.
Answer: 1 year to expiration. More time = more time value. A 1-year option has far more time for the stock to move favourably.
Answer: The strike price equals the current stock price. At-the-money (ATM) means the strike equals the current stock price — the option is right at the breakeven point.
Practice this with $10,000 in virtual cash in Tradecraft, free paper trading with real market data.
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