assume that a stock is selling for $47 with options available at 20, 30, and 40...

assume that a stock is selling for $47 with options available at 20, 30, and 40 strike price. The 30 call option is at 10 1/2. Calculate the following:

A) The intrinsic value of the $40 call.

B) Is the call in the money?

c)The speculative premium on the 30 call option

D) The percent the speculative premium represents of the common stock price

Solutions

Expert Solution

Solution:- Given in Question:-

A stock is selling for $47 with options available at 20, 30, and 40 strike price. The 30 call option is at 10 1/2.

A. The intrinsic value of the $40 call.

Intrinsic Value = Stock Selling Price - Call

Intrinsic Value = $47 - $40

Intrinsic Value = $7.

B. Is the call in the money -

Yes Because the stock price is greater than strike price.

C. The speculative premium on the 30 call option -

Speculative Premium = Call Option - Intrinsic Value

Speculative Premium = $10.50 - $7

Speculative Premium = $3.50

D. The percent the speculative premium represents of the common stock price-

Speculative premium as % of stock price =

Speculative premium as % of stock price = 7.45%

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jeff jeffy answered 1 year ago

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