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A call option has a premium of 2.50, the strike price is 23, and the underlying...

A call option has a premium of 2.50, the strike price is 23, and the underlying stock price is 22. What is the option's time value?

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Answer #1

Option premium=Intrinsic value+Time value
Given that the strike price is 23 and the underlying stock price is 22, so clearly the call option is out of money as the underlying stock price is less than strike price. So, the intrinsic value is 0

=>2.5=0+Time value

So, time value is 2.5

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