The settlement prices for the November American-style call and put options on natural gas futures with an exercise price of $3.70 are 0.244 and 0.224, respectively. These options expire on October 28. The options are written on the November natural gas futures contract; the settlement price for this futures contract is $3.643. The riskless interest rate is 0.266%.
a. Using the ten-step binomial tree, what is the volatility rate that sets the value of the call option equal to the call option’s settlement price?