Three weeks ago, you purchased a November 25 put option on Kepner stock at an option price of $1.20. The market price of the stock three weeks ago was $24.30. Today, the stock is selling at
$24)80 a share and the November 25 put is priced at $.60. What is the intrinsic value of your put
Contract?

Question

Quizplus · Accepted Answer

The intrinsic value of a put option is the difference between the strike price and the market price of the stock. In this case, the strike price is $25 and the market price is $24.80. Therefore, the intrinsic value is $0.20 per share. Since one contract represents 100 shares, the total intrinsic value of the put option is $20. The option price is irrelevant to the calculation of intrinsic value. Therefore, the correct answer is D, $20.

Three Weeks Ago, You Purchased a November 25 Put Option