A 3-month put has a strike price of $45 and an option premium of $1.10. The underlying stock is selling for $45.80 per share. What is the time value of the put?
A)$0
B)$.60
C)$.90
D)$1.10
E)$1.90

Question

Quizplus · Accepted Answer

The time value of an option is the option premium minus its intrinsic value. Since the put option's strike price is $45 and the stock price is $45.80, the option is out of the money and has no intrinsic value. Therefore, its time value is equal to the entire premium of $1.10.

A 3-Month Put Has a Strike Price of $45 and an Option