SIE (Securities Industry Essentials) Practice Exam

Call option contracts have intrinsic value when:

1. CMV exceeds exercise price

2. Exercise price exceeds CMV

3. There is no exercise price

4. They are not tied to any stocks

The correct answer is: CMV exceeds exercise price

Call option contracts have intrinsic value when the current market value (CMV) of the underlying asset exceeds the exercise price. This is because, in this scenario, the option holder has the ability to purchase the underlying asset at a lower price than its current value, resulting in a profit. Option contracts do not have intrinsic value when the exercise price exceeds the current market value or when there is no exercise price, as these scenarios would result in a loss for the option holder. Additionally, call option contracts must be tied to a specific stock or underlying asset in order to have intrinsic value. This means that D is not the correct answer as it states that the option contracts are not tied to any stocks and therefore would not have any intrinsic value.