Question:
Consider Triple Play’s call option with a $25 strike price. The following table contains historical values for this option at different stock prices:
Stock Price | Call Option Price |
---|---|
$25 | $3.00 |
30 | 7.50 |
35 | 12.00 |
40 | 16.50 |
45 | 21.00 |
50 | 25.50 |
a) Create a table which shows (1) stock price, (2) strike price, (3) exercise value, (4) option price, and (5) the time value.
b) What happens to the option’s time value as the stock price rises? Why?
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