Chapter 03 · Section 3.1

Put option

Intrinsic value is the difference between the current value of the underlying asset and the exercise price. N.B. The intrinsic value cannot be negative.

The intrinsic value of a put option is equal to:

a) the price of the underlying asset.
b) the exercise price.
c) the price of the underlying asset minus the exercise price.
• d) the exercise price minus the price of the underlying asset.
  Yes. The intrinsic value of a put is the profit its holder can make by exercising it: selling the underlying at the exercise price and buying it at the current market price. That profit equals the exercise price minus the current price of the underlying. Continue

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