- CFA Exams
- CFA Level I Exam
- Topic 7. Derivatives
- Learning Module 2. Forward Commitment and Contingent Claim Features and Instruments
- Subject 2. Contingent Claims: Options
CFA Practice Question
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
Correct Answer: C
The value of a warrant or an option equals the market price minus the strike (exercise) price.
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). |