What are the intrinsic values and time premiums paid for the following options?

Question

What are the intrinsic values and time premiums paid for the following options? Round your answer to the nearest cent.

Option

Intrinsic value of the calls:

$                   

If the stock sells for $46 at the expiration date of the preceding options, what are the profits or losses for the writers and the buyers of these options?

Option

Calls: XYZ, Inc., 45 $7.00 $49 XYZ, Inc., 50 2.50 49 Puts: XYZ, Inc., 45 1.25 49 XYZ, Inc., 50 4.25 49

Intrinsic value of the calls:

calls: XYZ 45: $   XYZ 50:

$                   

Explanation / Answer

Intrinsic value of calls= Current Price-Strike Price Time Premium= Premium paid- Intrinsic value Call option Current Price Strike Price Intrinsic value Premium Time Premium XYZ 45 $49.00 $45.00 $4.00 $7.00 $3.00 XYZ 50 $49.00 $50.00 $0.00 $2.50 $2.50 Intrinsic value of Put= Strike Price-Current Price Put option Strike Price Current Price Intrinsic value Premium Time Premium XYZ 45 $45.00 $49.00 $0.00 $1.25 $1.25 XYZ 50 $50.00 $49.00 $1.00 $4.25 $3.25 Profits for the buyers: Strike Price Market Price Profit Premium paid Net Profit/Loss Calls: XYZ 45: $45.00 $46.00 $1.00 $7.00 -$6.00 XYZ 50: $50.00 $46.00 $0.00 $2.50 -$2.50 Puts: XYZ 45: $45.00 $46.00 $0.00 $1.25 -$1.25 XYZ 50: $50.00 $46.00 $4.00 $4.25 -$0.25 -$10.00 Profits for the Writers: Strike Price Market Price Profit Premium paid Net Profit/Loss Calls: XYZ 45: $45.00 $46.00 -$1.00 $7.00 $6.00 XYZ 50: $50.00 $46.00 $0.00 $2.50 $2.50 Puts: XYZ 45: $45.00 $46.00 $0.00 $1.25 $1.25 XYZ 50: $50.00 $46.00 -$4.00 $4.25 $0.25 $10.00

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