The current market price of a share of LLY stock is $60. If a put option on this stock has a strike price of $55, the put
A) is in the money.
B) is at the money.
C) sells for a lower price than if the market price of LLY stock is $50.
D) is in the money and sells for a lower price than if the market price of LLY stock is $50.
E) is out of the money and sells for a lower price than if the market price of LLY stock is $50.

Question

Quizplus · Accepted Answer

A put option is out of the money when the market price of the stock is above the strike price. Since the market price ($60) is above the strike price ($55), the put is out of the money. It would sell for a lower price than if the market price were $50, as the intrinsic value would be higher at $50.

The Current Market Price of a Share of LLY Stock