A put option gives the holder the right, but not the obligation, to sell the underlying asset at the exercise price. Therefore, it only has intrinsic value if the market price is below the exercise price, as the holder could sell the asset for a profit by exercising the option. Choices A, C, and D describe call options.

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A Put Option

Question 94

Multiple Choice

A put option:

A) is an option that allows the writer to choose the time of exercise
B) has intrinsic value if the market price is below the exercise price
C) provides the writer with the right to buy the underlying asset at the exercise price
D) provides the holder with the right to buy the underlying asset at the exercise price.
E) None of these.

Correct Answer: