Answer: out of the money

## Explanation For a put option: - **In the money**: When the underlying asset price is **below** the strike price - **At the money**: When the underlying asset price equals the strike price - **Out of the money**: When the underlying asset price is **above** the strike price **Given:** - Strike price = $20.50 - Underlying price at expiration = $21.50 - Option premium = $1.00 (this is irrelevant for determining moneyness) **Analysis:** Since $21.50 > $20.50, the underlying price is **above** the strike price. Therefore, the put option is **out of the money**. **Key points:** 1. The option premium ($1.00) doesn't affect whether an option is in/at/out of the money - it only affects profitability. 2. At expiration, a put option has value only if the underlying price is below the strike price. 3. In this case, since $21.50 > $20.50, exercising the put option would mean selling at $20.50 when you could sell in the market for $21.50, which would result in a loss. **Correct answer: C (out of the money)**

Author: LeetQuiz .