The current market price of a share of IBM stock is $76. If a put option on this stock has a strike price of $80, 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 is in the money when the strike price is above the current market price, allowing the holder to sell the stock at a higher price than the current market value. Since the strike price ($80) is above the current market price ($76), the put option can be exercised profitably.

The Current Market Price of a Share of IBM Stock