Chapter 16 Options P16-1 Call Option You have taken a long position in a call option on IBM common stock. The option has an exercise price of $136 and IBM's stock currently trades at $140. The option premium is $5 per contract. a. What is your net profit on the option if IBM's stock price increases to $150 at expiration of the option and you exercise the option? Total profit = (New stock price-Exercise price-Option Contract price b. How much of the option premium you paid is due to intrinsic value and how much due to time value? The intrinsic value = (current stock price - Exercise price) The time value of the option = (Contract price-intrinsic value) c. What is your net profit on the option if IBM's stock price decreases to $130