Question
You have taken a long position in a call option on IBM common stock. The option has an exercise price of $155 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 $155 and IBM's stock currently trades at $159. The option premium is $7 per contract. a. How much of the option premium is due to intrinsic value versus time value? Option Premium Intrinsic value $ Time value b. What is your net profit on the option if IBMs stock price increases to $169 at expiration of the option and you exercise the option? (Negative amount should be indicated by a minus sign.) Net profit $ per share c. What is your net profit if IBMs stock price decreases to $149? (Negative amount should be indicated by a minus sign.) Net profit $ per share
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