Question
You have taken a long position in a call option on IBM common stock. The option has an exercise price of $140 and IBM's stock
You have taken a long position in a call option on IBM common stock. The option has an exercise price of $140 and IBM's stock currently trades at $144. The option premium is $6 per contract. a. How much of the option premium is due to intrinsic value versus time value? b. What is your net profit on the option if IBMs stock price increases to $154 at expiration of the option and you exercise the option? c. What is your net profit if IBMs stock price decreases to $134?
How much of the option premium is due to intrinsic value versus time value?
|
|
What is your net profit on the option if IBMs stock price increases to $154 at expiration of the option and you exercise the option and if IBMs stock price decreases to $134? (Negative amounts should be indicated by a minus sign.)
|
|
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started