Credit Risk - Option (CFAI Rd37 Q17 B)

CFA Level III
#1

this option is out of money at the moment, why would it have any credit risk to the option buyer? $6 market value is the premium, which is already paid to the option seller. the answer doesn’t make sense to me…

#2

you miss the word POTENTIAL

#3

got it, thanks fred… the premium is actually the PV of the potential option value, which is the current potential credit risk the long (call option) side is bearing… am i right?

#4

I think so