You own ten 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)−$500
B)−$50
C)$0
D)$50
E)$500

Question

Quizplus · Accepted Answer

The intrinsic value of a put option is calculated as the exercise price minus the current stock price, when the exercise price is higher. Here, each contract represents 100 shares, and the intrinsic value per share is $25 - $24.50 = $0.50. For ten contracts, the total intrinsic value is $0.50 * 100 * 10 = $500.

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