The current market price of a share of CSCO stock is $22. If a put option on this stock has a strike price of $20, the put
A) is out of the money.
B) is in the money.
C) sells for a higher price than if the strike price of the put option was $25.
D) is out of the money and sells for a higher price than if the strike price of the put option was $25.
E) is in the money and sells for a higher price than if the strike price of the put option was $25.

Question

Quizplus · Accepted Answer

A put option is considered "in the money" when the strike price is above the current market price, allowing the holder to sell the stock at a higher price than its market value. Since the strike price ($20) is below the current market price ($22), the put option is "out of the money," meaning it would not be profitable to exercise it based on the current stock price.

The Current Market Price of a Share of CSCO Stock