Chapter 03 · Section 3.1

Options-Time 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 this option's time value?

a) $3.45
b) -$5.00
• c) $1.55
  No. This would be true if it was a put option. However, it is a call. Call Option Intrinsic Value = Underlying Asset Price - Exercise Price Time Value = Option Premium - Intrinsic Value
  d) $5.00
  e) $.00

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