Call Option
You have taken a long position in a call option on UBR common
stock. The option has an exercise price of $142 and IBM’s stock
currently trades at $145. The option premium is $6 per
contract.
a. What is your net profit on the option if UBR’s stock price
increases to $150 at expiration of the option and you exercise the
option?
b. How much of the option premium you paid is due to intrinsic
value and how...