What is the time premium of a put with a strike price of $25 when the option price is $2 and the underlying common stock sells for $24?
A) $100
B) $200
C) $300
D) $400

Question

Quizplus · Accepted Answer

The intrinsic value of the put is $1 ($25 strike price - $24 stock price).

The time premium of the put is the option price - intrinsic value, which is $2 - $1 = $1.

To calculate the time premium in dollars, simply multiply by 100 (since each option represents 100 shares of stock):

$1 time premium x 100 = $100

What Is the Time Premium of a Put with a Strike