For a put option, the kink in the intrinsic value curve occurs at the
A) premium price.
B) exercise price.
C) value of $0.
D) value of strike price - market price.

Question

Quizplus · Accepted Answer

The kink in the intrinsic value curve for a put option occurs at the exercise price. This is because if the market price is above the exercise price, the option has no intrinsic value and its value is $0. However, if the market price is below the exercise price, the intrinsic value is equal to the difference between the exercise price and the market price. This creates a kink in the intrinsic value curve at the exercise price.

For a Put Option, the Kink in the Intrinsic Value