A put option on British pounds has a strike (exercise) price of $1.48. The present exchange rate is $1.55. This put option can be referred to as:
A) in the money.
B) out of the money.
C) at the money.
D) at a discount.

Question

​A put option on British pounds has a strike (exercise) price of $1.48. The present exchange rate is $1.55. This put option can be referred to as:
A) ​in the money.
B) ​out of the money.
C) ​at the money.
D) ​at a discount.

Quizplus · Accepted Answer

A put option is in the money if the strike price is higher than the current market price, and out of the money if the strike price is lower than the current market price. In this case, the strike price of $1.48 is lower than the current market price of $1.55, so the put option is out of the money.

​A Put Option on British Pounds Has a Strike (Exercise)

A Put Option on British Pounds Has a Strike (Exercise)