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What is the value of a put option at expiry if the stock price is 'S' and the exercise price is 'X'?

User Kiryl Ivanou
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1 Answer

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Final answer:

The value of a put option at expiry is the difference between the exercise price 'X' and the stock price 'S' if 'S' is below 'X', otherwise, its value is zero.

Step-by-step explanation:

The value of a put option at expiry is determined by whether the option is in or out of the money. A put option gives the holder the right to sell the underlying stock at a predetermined exercise price, 'X'. If the stock price at expiry 'S' is below the exercise price, the put option is in the money, and its value is the difference between 'X' and 'S', i.e., (X - S). If the stock price at expiry is higher than the exercise price, the put option expires worthless, and its value is zero.

To provide a clearer illustration, if a put option has an exercise price 'X' of $100 and the stock price 'S' at expiry is $90, the put option is in the money, and its value would be (X - S) = ($100 - $90) = $10.