The current market price of a share of MSI stock is $15. If a put option on this stock has a strike price of $20, the put
A) is out of the money.
B) is at the money.
C) can be exercised profitably.
D) is out of the money and can be exercised profitably.
E) is in the money and can be exercised profitably.

Question

Quizplus · Accepted Answer

A put option gives the holder the right to sell a stock at a specified strike price. If the current market price is below the strike price, as in this case ($15 market price vs. $20 strike price), the put option is "in the money" because exercising the option to sell at $20 is profitable compared to the current market price.

The Current Market Price of a Share of MSI Stock