You Own fiVe Put Option Contracts on XYZ Stock with an Exercise

question 249

Multiple Choice

You own five put option contracts on XYZ stock with an exercise price of $25. What is the total intrinsic value of these contracts if XYZ stock is currently selling for $24.50 a share?

• A) -$250
• B) -$50
• C) $0
• D) $50
• E) $250

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Definitions:

Saponification

The chemical reaction between a fat or oil and a base, resulting in the formation of glycerol and soap, usually sodium or potassium salts of fatty acids.

Sodium Hydroxide

A strong base and alkali used in various industries, known chemically as NaOH.

Animal Fat

A type of fat derived from animals, used in cooking and in the production of a variety of consumer goods.

Bases

Substances that can accept protons or donate a pair of valence electrons to form a bond and are characterized by a high pH, often above 7 when dissolved in water.