How can the strike price of a call option begin lower than the current market price?

Question

Regarding a call option how can the contract begin 'In The Money"? The price of a stock is $5 and the strike price is $3 at the beginning of the contract.

Answer 1

This is possible if the premium you are paying for the option, covers more than the discount.  In your example, you would have to pay at least $2, plus some additional amount for the time value of the option.