The price of a stock is $35 per share and the corresponding November put with an exercise price of $40 is trading at $3. The intrinsic value of the option is
A) zero
B) $5
C) $2
D) $3
E) -$5

Question

Quizplus · Accepted Answer

The intrinsic value of a put option is calculated as the exercise price minus the stock price, provided this difference is positive. Here, it's $40 - $35 = $5. If the difference is negative, the intrinsic value is considered zero, not negative.

The Price of a Stock Is $35 Per Share and the Corresponding