Prior to expiration,
A) the intrinsic value of a put option is greater than its actual value.
B) the intrinsic value of a put option is always positive.
C) the actual value of a put option is greater than the intrinsic value.
D) the intrinsic value of a put option is always greater than its time value.

Question

Quizplus · Accepted Answer

The actual value (market price) of a put option typically includes both its intrinsic value and its time value. Prior to expiration, the time value is positive, making the actual value greater than the intrinsic value, which only accounts for the difference between the strike price and the current price of the underlying asset.

Prior to Expiration