Option pricing - Single-period binomial approach The value of an option can be calculated by using a step-by-step approach in the case of single periods or by using sophisticated formulas that can be easily created through a spreadsheet. In the real world, two possible outcomes for a stock price in six months is an assumption. The stock markets are volatile, and stocks move up and down based on market- and firm-specific factors. Consider the case of Canada Tel Inc.: Shares of Canada Tel Inc., a manufacturer of cell phones, sell for $30.00. (Assume that you get the option for free!) Existing options allow for the option holder to purchase one additional share at an exercise price of $22.00. The option will expire within one year. Assume that at that time there will be an 90% chance that Canada Tel Inc. shares will sell for $38.00 and a 10% chance that the shares will be selling at $20.00. Based on the binomial approach, the expected end-term share price and return on Canada Tel Inc. shares are