Question

• Using the “Ask” as the price of the option, calculate intrinsic value and time value for each call and put option.

			CALL OPTIONS										PUT OPTIONS
Open Int	Vol	Change	Last	Bid	Ask	Intrinsic	Time	Stock Price	Strike	Intrinsic	Time	Bid	Ask	Last	Change	Vol	Open Int
0	0	0	74	98.8	100.5			$479.93	380			0.03	0.16	0.15	0	0	1,135
0	0	0	68.01	89.9	90.55			$479.93	390			0.1	0.15	0.23	0	0	418
41	14	4.16	81.2	80	80.4			$479.93	400			0.12	0.2	0.2	-0.08	65	852
48	30	11.75	70.45	70.05	70.55			$479.93	410			0.26	0.28	0.26	-0.18	202	1,031
155	16	4.3	60.7	60.35	60.75			$479.93	420			0.43	0.51	0.49	-0.18	211	886

Answer 1

Option can be standardized in following manners -

	Call option	Put option
At the money(ATM)	Exercise Price = Market Price	Exercise Price = Market Price
In the money(ITM)	Exercise Price < Market Price	Exercise Price > Market Price
Out the money(OTM)	Exercise Price > Market Price	Exercise Price < Market Price

a. Intrinsic Value of Option - It is Nil in case of the ATM or OTM and In case of ITM, it is the difference of current stock price and strike Price.

b. Time value of Option = Total value of option - Intrinsic value of option

Please refer below spreadsheet for calculations and answers. Formula reference also provided for better understanding -

Formula reference -