The common shares of Twitter, Inc (TWTR) recently traded on the NYSE for $19 30 per share You have employee stock options to purchase 1,000 TWTR shares for $17 2 per share The options expire in three years Assume that the annualized volatility of TWTR stock is 86 2 percent and that the interest rate is 2 9 percent (Assume the options are European options that may only be exercised at the maturity date ) a Is this option a call or a put multiple choice Call Put b Using an option pricing calculator such as the one at erieri com blackscholes, estimate the value of your TWTR options (Round your answer to nearest whole number ) c What is the estimated value of the options if their maturity is six months instead of three years (Round your answer to nearest whole number ) d What is the estimated value of the options if their maturity is three years, but TWTRs volatility is 60 8 percent (Round your answer to nearest whole number )

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Posted on Oct 06, 2024

The common shares of Twitter, Inc. (TWTR) recently traded on the NYSE for $19.30 per share. You have employee stock options to purchase 1,000 TWTR

The common shares of Twitter, Inc. (TWTR) recently traded on the NYSE for $19.30 per share. You have employee stock options to purchase 1,000 TWTR shares for $17.2 per share. The options expire in three years. Assume that the annualized volatility of TWTR stock is 86.2 percent and that the interest rate is 2.9 percent. (Assume the options are European options that may only be exercised at the maturity date.)

a. Is this option a call or a put?

multiple choice

Call
Put

b. Using an option pricing calculator such as the one at erieri.com/blackscholes, estimate the value of your TWTR options. (Round your answer to nearest whole number.)

c. What is the estimated value of the options if their maturity is six months instead of three years? (Round your answer to nearest whole number.)

d. What is the estimated value of the options if their maturity is three years, but TWTRs volatility is 60.8 percent? (Round your answer to nearest whole number.)