The value of a put option at expiration equals the
A)market price of the share minus the exercise price.
B)higher of the exercise price minus market price of the share and zero.
C)exercise price.
D)share price.

Question

Quizplus · Accepted Answer

The value of a put option at expiration is determined by comparing the market price of the share with the exercise price. If the market price is lower than the exercise price, the holder of the put option can exercise the option, selling the shares at the higher exercise price. Therefore, the value of the put option at expiration is equal to the higher of the exercise price minus market price of the share and zero. This is because if the market price is higher than the exercise price, there is no benefit to exercising the option and the holder would let it expire worthless.

The Value of a Put Option at Expiration Equals the