Use the option quote information shown to answer the questions that follow. The stock price is currently selling for $83.
Option and NY Expiration Strike/Exercise Calls Puts
Close Price Vol. Last Vol. Last
RWJ
March 80 230 2.80 160 .80
April 80 170 6 127 1.40
July 80 139 8.05 43 3.90
October 80 60 10.20 11 3.65
Q1. Are the call options in the money? What is the intrinsic value of an RWJ Corp. call option?
Q2. Are the put options in the money? What is the intrinsic value of an RWJ Corp. put option?
Q3. Two of the options are clearly mispriced. Which one? At a minimum, what should the mispriced option sell for? Explain how you could profit from the mispricing in each case?