When the slope of the at expiration curve is close to zero, the call option is :
a. in the money
b. out of the money
c. at the money
The answer is B.
I do not get the answer! When the slope is close to zero this means that delta is close to zero which means that there is not much change in the call option and accordingly it is close to our expectations and hence it should be in the money or at the money.
When the delta is close to zero, that means changes to the stock price are minimally impacting the option price. Then can only happen when the option is far from the money. For example, if the strike is 100 and you have 5 days to go until expiration, but the stock price is 70. Well, even if the stock has a $5+ gain in a day, its still so far from the strike… that means the option price will probably gain very little.
When options are at the money, delta is close to .5.