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The S&P 500 index is currently at $2,000. The one-year $1,900-strike European call option on the...

The S&P 500 index is currently at $2,000. The one-year $1,900-strike European call option on the index is quoted at $191. The one-year $1,900-strike European put option on the index is quoted at $58

What is the current intrinsic value ( ) and time value ( ) for the call option? What is the current intrinsic value ( ) and time value ( ) for the put option?

Solutions

Expert Solution

Call option price =$191

Strike price =1900

Current Price of underlying S&P500= 2000

Intrinsic value of call option = Current price - strike price

=2000-1900

=100

Time value = Option price - intrinsic value

=191-100

=$91

So intrinsic value of call option is $100 and time value is $91

B.

Put option price =58

Current price of underlying = 2000

Intrinsic value of put option =strike price - current price

(It cannot be negative)

=1900-2000

=0

Time value = Option price - intrinsic value

=58-0

=$58

So intrinsic value of put option is 0 and time value is 58

jeff jeffy answered 2 years ago
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