The current market price of a share of a stock is $80. If a put option on this stock has a strike price of $75, the put
A) is in the money.
B) is at the money.
C) sells for a lower price than if the market price of the stock is $75.
D) is in the money and sells for a lower price than if the market price of the stock is $75.
E) is out of the money and sells for a lower price than if the market price of the stock is $75.

Question

Quizplus · Accepted Answer

A put option is out of the money when the market price of the stock is above the strike price. Since the market price ($80) is above the strike price ($75), the put is out of the money. An out-of-the-money option generally sells for a lower price than if the market price were at or below the strike price.

The Current Market Price of a Share of a Stock