Chapter 03 · Section 3.1
Calls and puts-Intrinsic Value
CALL PUT
Exercise Mar Jun Sep Mar Jun Sep
Price
30 10.15 10.85 11.65 0.05 0.35 0.85
35 5.40 6.90 8.10 0.25 1.35 2.15
40 1.90 4.00 5.35 1.75 3.40 4.35
45 0.40 2.10 3.45 5.30 6.50 7.40
50 0.05 1.05 2.15 10.05 10.50 11.15
Stock price: $40 Today's date: February
What is the intrinsic value of the option in bold?
a) $3.45
b) -$5.00
c) $3.00
d) $5.00
e) $.00
To determine the intrinsic value of an option you must know the exercise price and the price of the underlying asset.
The intrinsic value is one of the two major components of the premium.