The intrinsic value of an in-the-money put option is equal to
A)the stock price minus the exercise price.
B)the put premium.
C)zero.
D)the exercise price minus the stock price.
E)none of the above.

Question

Quizplus · Accepted Answer

The intrinsic value of an in-the-money put option is calculated as the exercise price minus the stock price. This is because the put option would be valued for more than the market price of the stock, and thus the holder of the put option could sell the stock at the exercise price and make a profit. Therefore, the intrinsic value of an in-the-money put option is equal to the difference between the exercise price and the current stock price.

The Intrinsic Value of an In-The-Money Put Option Is Equal