Calculate the intrinsic value and time value from the mid-market (average of bid
ID: 2724040 • Letter: C
Question
Calculate the intrinsic value and time value from the mid-market (average of bid and offer) prices the July 2012 call options in Table 1.2 Do the same for the July 2012 put options in Table 1.3. Assume in each case that the current mid-market stock price is $561.40
Table1.2 Prices of call options on Google, June 25, 2012; stock price: bid $561.32; offer $561.51
Table 1.3 Prices of put options on Google, June 25, 2012; stock price: bid $561.32; offer $561.51
Srike price ($) July.2012 July.2012 Sept. 2012 Sept.2012 Dec 2012. Dec. 2012 Bid Offer Bid Offer Bid Offer 520 46.50 47.20 55.40 56.80 67.70 70.00 540 31.70 32.30 41.60 42.50 55.30 56.20 560 20.00 20.40 30.20 30.70 44.20 45.00 580 11.30 11.60 20.70 21.20 34.50 35.30 600 5.60 5.90 13.50 13.90 26.30 27.10Explanation / Answer
Srike price ($)
July.2012
July.2012
Intrinsic
value
Time value
Bid
Offer
520
46.50
47.20
41.4
5.45
540
31.70
32.30
21.4
10.6
560
20.00
20.40
1.4
18.8
580
11.30
11.60
0
11.45
600
5.60
5.90
0
5.75
Put option
Strike price ($)
July.2012
July. 2012
Intrinsic value
Time value
Bid
Offer
520
5.00
5.30
0
5.15
540
10.20
10.50
0
10.35
560
18.30
18.70
0
18.5
580
29.60
30.00
18.6
11.2
600
43.80
44.40
38.6
5.5
Intrinsic value of call =stock price –strike price
Intrinsic value of put=strike price –stock price
Time value =option premium –intrinsic value
Srike price ($)
July.2012
July.2012
Intrinsic
value
Time value
Bid
Offer
520
46.50
47.20
41.4
5.45
540
31.70
32.30
21.4
10.6
560
20.00
20.40
1.4
18.8
580
11.30
11.60
0
11.45
600
5.60
5.90
0
5.75
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.