Question

1. A stock is selling for $59.07 per share. A put option on the stock has...

1. A stock is selling for $59.07 per share. A put option on the stock has a $58.50 strike price and a $0.78 premium. The put is:

a. Out of the money because the option's strike price is below the stock's market price

b. Out of the money because the option premium is below the option strike price

c. In the money because the option premium is below the option strike price

d. Out of the money because the option's premium is below the stock's market price

e. In the money because the option's premium is below the stock's market price
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Answer #1


Correct option is > a. Out of the money because the option's strike price is below the stock's market price

.

While determining; In the money or Out of the money option we require only two things: 1) Strike price and Current asset price. For put option out of the money options are when the strike prices are below the current asset price hence, in this case the put option is Out of the money because Strike price is lower than current selling price of the asset.

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