diff --git a/common/lib/capa/capa/inputtypes.py b/common/lib/capa/capa/inputtypes.py
index 9dfd50836f..12bee69b01 100644
--- a/common/lib/capa/capa/inputtypes.py
+++ b/common/lib/capa/capa/inputtypes.py
@@ -309,6 +309,9 @@ class OptionInput(InputTypeBase):
         Given options string, convert it into an ordered list of (option_id, option_description) tuples, where
         id==description for now.  TODO: make it possible to specify different id and descriptions.
         """
+        # convert single quotes inside option values to html encoded string
+        options = re.sub(r"([a-zA-Z])('|\\')([a-zA-Z])", r"\1'\3", options)
+        options = re.sub(r"\\'", r"'", options)  # replace already escaped single quotes
         # parse the set of possible options
         lexer = shlex.shlex(options[1:-1].encode('utf8'))
         lexer.quotes = "'"
@@ -316,7 +319,8 @@ class OptionInput(InputTypeBase):
         lexer.whitespace = ", "
 
         # remove quotes
-        tokens = [x[1:-1].decode('utf8') for x in lexer]
+        # convert escaped single quotes (html encoded string) back to single quotes
+        tokens = [x[1:-1].decode('utf8').replace("'", "'") for x in lexer]
 
         # make list of (option_id, option_description), with description=id
         return [(t, t) for t in tokens]
diff --git a/common/lib/capa/capa/tests/test_inputtypes.py b/common/lib/capa/capa/tests/test_inputtypes.py
index 6d7a8e1ce9..b878220edb 100644
--- a/common/lib/capa/capa/tests/test_inputtypes.py
+++ b/common/lib/capa/capa/tests/test_inputtypes.py
@@ -41,7 +41,7 @@ class OptionInputTest(unittest.TestCase):
     '''
 
     def test_rendering(self):
-        xml_str = """<optioninput options="('Up','Down')" id="sky_input" correct="Up"/>"""
+        xml_str = """<optioninput options="('Up','Down','Don't know')" id="sky_input" correct="Up"/>"""
         element = etree.fromstring(xml_str)
 
         state = {'value': 'Down',
@@ -54,7 +54,7 @@ class OptionInputTest(unittest.TestCase):
         expected = {
             'STATIC_URL': '/dummy-static/',
             'value': 'Down',
-            'options': [('Up', 'Up'), ('Down', 'Down')],
+            'options': [('Up', 'Up'), ('Down', 'Down'), ('Don\'t know', 'Don\'t know')],
             'status': 'answered',
             'msg': '',
             'inline': False,
@@ -80,6 +80,10 @@ class OptionInputTest(unittest.TestCase):
         check(u"('б в','в')", [u'б в', u'в'])
         check(u"('Мой \"кавыки\"место','в')", [u'Мой \"кавыки\"место', u'в'])
 
+        # check that escaping single quotes with leading backslash (\') properly works
+        # note: actual input by user will be hasn\'t but json parses it as hasn\\'t
+        check(u"('hasnt','hasn't')", [u'hasnt', u'hasn\'t'])
+
 
 class ChoiceGroupTest(unittest.TestCase):
     '''
diff --git a/common/lib/capa/capa/tests/test_responsetypes.py b/common/lib/capa/capa/tests/test_responsetypes.py
index 6b400dc653..1c6ccd67c3 100644
--- a/common/lib/capa/capa/tests/test_responsetypes.py
+++ b/common/lib/capa/capa/tests/test_responsetypes.py
@@ -345,6 +345,17 @@ class OptionResponseTest(ResponseTest):
         # Options not in the list should be marked incorrect
         self.assert_grade(problem, "invalid_option", "incorrect")
 
+    def test_quote_option(self):
+        # Test that option response properly escapes quotes inside options strings
+        problem = self.build_problem(options=["hasnot", "hasn't", "has'nt"],
+                                     correct_option="hasn't")
+
+        # Assert that correct option with a quote inside is marked correctly
+        self.assert_grade(problem, "hasnot", "incorrect")
+        self.assert_grade(problem, "hasn't", "correct")
+        self.assert_grade(problem, "hasn\'t", "correct")
+        self.assert_grade(problem, "has'nt", "incorrect")
+
 
 class FormulaResponseTest(ResponseTest):
     """