Suppose that mid-east terrorists crashed a stolen corporate jet full of nerve gas into Disney world.
A) Explain the likely effects of this effect on the intrinsic value of an S& P 500 stock index call option that had a strike price equal to the value of the Index just prior to the attack.
B) Suppose that the current family of options mentioned on the S& P 500 Index were due to expire two months after the terrorist attack. Explain the effects of the attack on the Time Value of call options on the S&P 500 index immediately after the attack. Draw to illustrate your answer. Be sure to label your diagram clearly.