Question

please answer question 6

6. Consider the Black-Scholes call option formula and suppose the price of the underlying stock gets very large relative to the option's exercise price. As the stock price gets larger, what value would the option be approaching? 

Answer 1

And 6)

As per Black Scholes model formula of call option is C = SN(d1) - Xe- rt N(d2)

Where S is the price of the underlying asset and X is the exercise price

So we can see in very easy way X is getting deducted from S so if S will be large compare to X value of call price will keep increasing. Which means Spot price is very high in comparison to option exercise price and buyer of the call option is in good profit. Profit will keep increasing as the Current price,