Three weeks ago, you purchased a June $47.50 put option on Hi-Tech Metals stock at an option price of $.60 per share. The market price of the stock three weeks ago was $47.20. Today, the stock is selling at $48.10 a share. What is the intrinsic value of your put contract?

Question

Quizplus · Accepted Answer

The intrinsic value of a put option is calculated as the strike price minus the current stock price, but it cannot be less than zero. Since the current stock price ($48.10) is higher than the strike price ($47.50), the intrinsic value of the put option is $0.

Three Weeks Ago, You Purchased a June $47