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Basic Question 16 of 18
On a put option the strike price minus the market price is referred to as the ______.
B. total premium
C. intrinsic value
A. speculative premium
B. total premium
C. intrinsic value
User Contributed Comments 7
| User | Comment |
|---|---|
| aakash1108 | Intrinsic Value = Max(0,X-S) and not only (X-S) What if X-S < 0 ??? Then it is 0 I guess. |
| schweitzdm | I don't believe the value is zero, aakash1108. |
| schweitzdm | Actually I take that back! |
| ankurwa10 | this discussion is on another level. someone explain? |
| birdperson | if x-s is less than 0 for a put you wouldn't exercise the option |
| khalifa92 | intrinsic value = exersice value |
| khalifa92 | the value of either put or call is either zero (if exercising the option gains no benefits) or the difference between ST-X (call), X-ST (put). |
I passed! I did not get a chance to tell you before the exam - but your site was excellent. I will definitely take it next year for Level II.
Tamara Schultz
Learning Outcome Statements
determine the value at expiration and profit from a long or a short position in a call or put option
contrast forward commitments with contingent claims
CFA® 2024 Level I Curriculum, Volume 5, Module 2.