Question

If you purchase put options on €100 million with a strike price of $1.1150/€, what is the intrinsic value of the option contracts if the Euro is currently at $1.1325/€?

a)0 – the option is at the money

b)0 – the option is in the money

c)0 – the option is out of the money

d)$1,750,000

e)$17,500,000

Answer 1

In case of a put option, whenever the strike price is less than the market price, the option's intrinsic value is said to be 0 and the option is called an out of the money option.

As can be seen in the given case the strike price of $ 1.1150 / is lower than the market price of $ 1.1325 / , hence the intrinsic value is 0 and the option is out of the money.

So, the correct answer is option c