Chapter 03 · Section 3.1

August call

This option is traded on a stock whose current market price is $ 153.00. The current month is May. The options expire in August. What is the intrinsic value of this option?

a) $ -7
• b) $ 0
  Yes. In this case subtracting the exercise price from the current market price yields a negative value. Since intrinsic value can never be negative, the intrinsic value is zero.
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  c) $ 7
  d) $ 6.50

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