Suppose you purchase a call option to buy IBM common stock at $35 per share in September. The current price of IBM is 37 and the option premium is 4
What is the intrinsic value of the option? As the expiration date on the option approaches, what will happen to the size of the option premium?
The intrinsic value of the option is the difference between the current market price of IBM and the strike price. In this case, the intrinsic value would be $2. As the expiration date approaches, the size of the option premium will approach its intrinsic value.
You might also like to view...
For decades, the NCAA restricted the number of college football and basketball games that could be televised, and in 1982 the University of Georgia and the University of Oklahoma sued the NCAA under the federal antitrust laws
In 1984, the Supreme Court decided the case A) against the NCAA, citing anticompetitive practice. B) against the NCAA, citing that the NCAA did not control what television networks put on the air. C) for the NCAA, citing the fact that belonging to the NCAA was voluntary. D) against the NCAA, citing explicit collusion among the larger colleges.
The reserve requirement refers to: a. the fraction of deposits that banks are required by the Fed to hold as reserves
b. the amount of gold required to back up all Federal Reserve notes. c. the requirement that banks reserve part of their lending capacity for small businesses. d. the requirement that Reserve bank presidents be part of the FOMC. e. the Treasury deposits held by the Fed.