Explanation

Intrinsic value of a put option is calculated as:

$\text{Intrinsic Value} = \max(\text{Strike Price} - \text{Stock Price}, 0)$

Given:

• Stock price = $25
• Strike price = $20

Calculation: $\text{Intrinsic Value} = \max(20 - 25, 0) = \max(-5, 0) = 0$

Since the strike price ($20) is less than the current stock price ($25), the put option is out-of-the-money and has zero intrinsic value.

Key points:

• For put options: intrinsic value exists only when stock price < strike price
• When stock price > strike price, the put option has no intrinsic value
• The option may still have time value (extrinsic value) due to the remaining time until expiration