A put option is out of the money if the
A) expiration date is more than six months.
B) market price is greater than the exercise price.
C) the stock declares a dividend.
D) market and exercise prices are equal.

Question

Quizplus · Accepted Answer

An out of the money put option means that the market price of the underlying asset is greater than the exercise price. Option A is not correct as the expiration date alone does not determine whether an option is in the money or out of the money. Option C is also not correct as dividends affect the price of the underlying asset but not the status of the option. Option D is incorrect as an option with equal market and exercise prices is considered at the money.

A Put Option Is Out of the Money If the