Question

At expiration, the time value of an at-the-money put option is always?

1) Zero
2) Positive
3) Negative
4) Cannot be determined

Answer 1

The time value of an at-the-money put option is always zero at expiration.

Step-by-step explanation:

The time value of an at-the-money put option is always zero at expiration.

The time value of an option refers to the portion of the option's premium that is attributable to the amount of time remaining until expiration. As an option approaches its expiration date, the time value diminishes and eventually becomes zero. At expiration, an at-the-money put option has no time value because its strike price is equal to the current market price of the underlying asset, making it essentially worthless.