The intrinsic value of an out-of-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 out-of-the-money put option is equal to zero as the current stock price is higher than the exercise price. In other words, the put option has no value in terms of being able to sell the stock at a higher price than its current price. The only value of the option is the potential for the stock price to decrease and for the option to become in-the-money.

The Intrinsic Value of an Out-Of-The-Money Put Option Is Equal