What is the intrinsic value of the call option that expires


Use the following information on call and put options for IBM to answer the questions.

962_Table.jpg

a. What is the intrinsic value of the call option that expires in April and has a $95 strike price?

b. What is the intrinsic value of the put option that expires in January and has a $105 strike price?

c. Briefly explain why a call with a $105 strike price sells for less than a call with a $95 strike price (for all expiration dates) while a put with a $105 strike price sells for more than a put with a $95 strike price (for all expiration dates).

d. Suppose you buy the January call with a strike price of $105. If you exercise it when the price of IBM is $130, what will be your profit or loss?
e. Suppose you buy the April put at the price listed and the price of IBM stock remains at $90.78. What will be your profit or loss?

Request for Solution File

Ask an Expert for Answer!!
Financial Management: What is the intrinsic value of the call option that expires
Reference No:- TGS01707942

Expected delivery within 24 Hours