An investor purchases a put option with a strike price of $100 for $3.This option is considered "in the money" if the underlying is trading:
A)below $100.
B)at $100.
C)above $100.
D)above $103.

Question

Quizplus · Accepted Answer

A put option gives the holder the right to sell the underlying asset at the strike price. In this case, since the strike price is $100, the investor will make a profit if the underlying asset is trading below $100. Therefore, the option is considered "in the money" if the underlying is trading below $100.

An Investor Purchases a Put Option with a Strike Price