The current market price of a share of a stock is $20. If a put option on this stock has a strike price of $18, the put
A) is out of the money.
B) is in the money.
C) sells for a higher price than if the strike price of the put option was $23.
D) is out of the money and sells for a higher price than if the strike price of the put option was $23.
E) is in the money and sells for a higher price than if the strike price of the put option was $23.

Question

Quizplus · Accepted Answer

A put option is out of the money when the strike price is below the current market price of the stock. Since the strike price is $18 and the market price is $20, the put is out of the money.

The Current Market Price of a Share of a Stock