Chapter 03 · Section 3.1
August put
This option is traded on a stock whose current market price is $ 153.00. The current month is May. The options expire in August.
What is the intrinsic value of this option?
a) $ -7
b) $ 0
c) $ 7
d) $ 10.50
Intrinsic value is the profit an option holder would realize if he were to exercise the option. Since the owner of a put profits by a price decrease, any profit he makes is when the market price is lower than the exercise.