Question

A put option has an intrinsic value of zero if the option is:

a. In the money
b. At the money and in the money
c. At the money or out of the money
d. Out of the money
e. Atthe money

Answer 1

A put option has an intrinsic value of zero if it is at the money (ATM) or out of the money (OTM), meaning the strike price is equal to or less than the market price of the underlying asset.

Step-by-step explanation:

The intrinsic value of a put option is determined by the option's strike price relative to the current market price of the underlying asset. The intrinsic value is the amount by which an option is in the money (ITM). For a put option, this means the strike price is above the market price. If an option is at the money (ATM) or out of the money (OTM), its intrinsic value is zero because the option holder wouldn't make any profit from exercising the option; the market price is equivalent to (ATM) or higher than (OTM) the strike price. Therefore, the correct answer is c. At the money or out of the money.