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20 October, 16:56

Let's say a trader bought an 85 strike put for $1.75. When he bought it, $0.50 of that premium was extrinsic value. If this option expires OTM, how much intrinsic value does it have at expiration?

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  1. 20 October, 19:09
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    The question is incomplete, the options include;

    1. $1.25

    2. $0.00. is Correct

    3. $1.75

    4. $0.50

    Explanation:

    OTM - No interest inherent in that. OTM The quality of the options is purely extrinsic.

    $0.50-$ 1.75 = $1.25 Fair interest.

    However as mentioned above.

    OTM Put has no intrinsic value, it offers the seller the rights to sell at such a lower price than that of the marker value.

    OTM at expiration options will expire worthlessly (go unallocated).
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