You have taken a long position in a call option on IBM common stock. The option has an exercise price of $139 and IBM's stock currently trades at $145.
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 IBM's stock price increases to $155 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 IBM's stock price decreases to $135? (Negative amount should be indicated by a minus sign.)
Net profit $
per share