OPTIONS

You sell a March 19 $3.60/pound put option on 25,000 pounds of copper at a premium of $0.20/pound. The current price of copper is $3.58/pound.

a. Describe this option

Is it a right to buy copper or to sell copper?

When does the option expire?

What is the underlying market for this option?

What is the exercise price/strike price of the option?

Did you pay or receive a premium? How much/pound? How much total?

b. What is the intrinsic value of the option?

c. What is the time value of the option?

d. Is the option "in the money" or "out of the money"?

e. When the option expires, who decides whether to exercise the option: you or the counterparty who sold the option?

f. If the price of copper is $3.55/pound when the option expires, will the option be exercised? Why/why not?