Consider the following equation: C = S - K + dis(K)+ P
In this equation,S - K tells us:
A)the market value of the option.
B)the time value of the option.
C)the option spread.
D)the intrinsic value of the option.

Question

Quizplus · Accepted Answer

S - K represents the difference between the current price of the underlying asset (S) and the strike price of the option (K). This difference is known as the intrinsic value of the option. Therefore, the correct choice is D, which says "the intrinsic value of the option."

Consider the Following Equation: C = S - K