Call Options
A call option with a strike price of $60 when the underlying stock is trading at $55 is:
Call OTM: strike > market. Put OTM: strike < market. No intrinsic value when OTM.
Complete Analysis & Legal Rationale
A call option is out of the money when the strike price is above the current market price. With a $60 strike and $55 market price, the call holder would not exercise because they could buy the stock cheaper in the market.
Distractor Autopsy (Why Other Options Are Traps)
FINRA exam writers design incorrect distractors using specific calculation mistakes and regulatory misconceptions. Review why each option succeeds or fails:
In the money for calls means strike is below market price.
At the money means strike equals market price.
Matches the verified teaching point in the explanation.
Break-even considers the premium paid, not just strike vs. market.
Official Standard: Governs options accounts, approvals, and related supervisory requirements (verify current text).
Official Standard: Outline-level citation: item maps to Series 7 topic coverage. Prefer a specific FINRA/SEC/MSRB rule citation in a later author pass.