Consider a stock that is currently trading at $65. Calculate the intrinsic value for a put option that has an exercise price of $55.
A) $10
B) $50
C) $55
D) -$10
E) $0

Question

Quizplus · Accepted Answer

The intrinsic value of a put option is calculated as the maximum of zero or the exercise price minus the stock price. Here, it's max(0, $55 - $65) = max(0, -$10) = $0. Since the stock price is above the exercise price, the put option has no intrinsic value.

Consider a Stock That Is Currently Trading at $65