You own five put option contracts on XYZ stock with an exercise price of $25. What is the total intrinsic value of these contracts if XYZ stock is currently selling for $24.50 a share?
A) -$250
B) -$50
C) $0
D) $50
E) $250

Question

Quizplus · Accepted Answer

The intrinsic value of a put option is calculated as the exercise price minus the current stock price, multiplied by the number of shares per contract. Here, the intrinsic value per contract is ($25 - $24.50) * 100 = $50. Since you own five contracts, the total intrinsic value is $50 * 5 = $250.

You Own Five Put Option Contracts on XYZ Stock with an Exercise