Calculate the intrinsic value and time value from the mid-market (average of bid
ID: 2724884 • Letter: C
Question
Calculate the intrinsic value and time value from the mid-market (average of bid and ask) prices of the August 2016 call options on Apple (AAPL) in table below for each strike price highlighted in red (K = 90, 92.5, 95, 97.5, 100). Assume in each case that the current mid-market stock price is $94.45.
RVol Open Int Root Strike Aug 19, 2016 10.89 -0.74 10.75 10.90 24 397 AAPL 85 14 AAPL 87.5 Aug 19, 2016 7.34 -0.61 7.25 7.35 114 1391 AAPL 90 Aug 19, 2016 5.90 -0.60 5.75 5.9025 127 AAPL 92.5 Aug 19, 2016 4.70 -0.40450 4.60 545 4779 AAPL 95 Aug 19, 2016 3.57 -0.41 3.45 3.55 119 4081 AAPL 97.5 Aug 19, 2016 2.65 -0.32 2.61 2.67 536 9174 AAPL 100 Calls Last Chg S - Aug 19, 2016 9.75 8.85 9.05 0Explanation / Answer
Strike Price
Bid
Ask
Mid
Stock Price
Intrinsic Value
Time Value
$90.00
$7.25
$7.35
$7.30
$94.45
$4.45
$2.85
$92.50
$5.75
$5.90
$5.83
$94.45
$1.95
$3.88
$95.00
$4.50
$4.60
$4.55
$94.45
-$0.55
$5.10
$97.50
$3.45
$3.55
$3.50
$94.45
-$3.05
$6.55
$100.00
$2.61
$2.67
$2.64
$94.45
-$5.55
$8.19
Intrinsic Value = Current Stock Price – Strike Price
Time Value = Premium – Intrinsic Value (Here, premium is the Mid price)
Strike Price
Bid
Ask
Mid
Stock Price
Intrinsic Value
Time Value
$90.00
$7.25
$7.35
$7.30
$94.45
$4.45
$2.85
$92.50
$5.75
$5.90
$5.83
$94.45
$1.95
$3.88
$95.00
$4.50
$4.60
$4.55
$94.45
-$0.55
$5.10
$97.50
$3.45
$3.55
$3.50
$94.45
-$3.05
$6.55
$100.00
$2.61
$2.67
$2.64
$94.45
-$5.55
$8.19
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