A put option that is described as in the money would find:
A)The market price of the stock above the strike price.
B)The strike price is above the market price of the stock.
C)The market and strike prices are the same.
D)The option has been exercised.

Question

Quizplus · Accepted Answer

A put option gives the holder the right, but not the obligation, to sell an underlying asset at a predetermined strike price within a specified time frame. An option is said to be "in the money" if exercising it would result in a profit. For a put option to be "in the money," the market price of the stock should be below the strike price. Therefore, if the strike price is above the market price, the option is in the money. Choice A is incorrect because the market price of the stock should be below the strike price for a put option to be "in the money." Choice C is incorrect because if the market and strike prices are the same, the option is considered "at the money." Choice D is incorrect because exercising the option is not required for it to be "in the money."

A Put Option That Is Described as in the Money