Question

The intrinsic value of an out-of-the-money option is ______________.

A: equal to the time value of the option

B: negative

C: zero

D: equal to the exercise price of the option

Answer 1

Answer to the Question is Option "C" i.e Zero.

With respect to call option, when the strike price is lower than the price of a stock also know us underlying price then we call it Out of money option. When it comes to put option, the strike price is above than the price of a stock also know us underlying price the we call it Out of Money Option.

As explained above the Out of money option can be called an option with no intrinsic value or the option will only a extrinsic value.