Problem:
The exercise price on a call option is $30 and the price of the underlying stock is $35. The option will expire in 35 days. The option is currently selling for $5.75.
Answer the following question:
Question 1: Calculate the option's exercise value?
Question 2: Calculate the value of the premium over and above the exercise value?
Question 3: Is this an out-of-the money, at-the-money, or in-the-money option?
Question 4: What will happen to the time and exercise value of the option if the underlying stock price changes to $30?
Question 5: Is this an example of a covered call option or a naked call option?
Explain in detail and please show your all work.