Question

2. The table below shows the option chain of AT&T Inc. Current stock price is $37. Option Type Strike Price Option Price Intrinsic Value Time Value Moneyness Breakeven Price Gain/Loss Price@$38 Expiry Dates 20- Dec- 2019 Call $30.00 $7.85 Call 17-Jan- 2020 $30.00 $8.60 Call 17-Jan- 2020 $40.00 $0.35 Put 20- Dec- 2019 $30.00 $0.31 Put 17-Jan- 2020 $30.00 $0.78 Put 17-Jan- 2020 $40.00 $6.80 a. Fill in all the missing cells in the table above. (15 marks) b. Based on what you find from the table, what is the relation between time to expiration and option value? (1 marks) c. Based on what you find from the table, what is the relation between strike price and option value for call and put option respectively. (1 marks) d. What are the other three factors affecting option value other than time and strike price? (3 marks)

Answer 1

Please refer working notes for the table.

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2. The table below shows the option chain of AT&T Inc. Current stock price is $37 oto s) INote 4) Gain/Loss) Price@$38 Net) Nete 2) Intrinsic Option Туре Expiry Dates Strike Option Price Time Breakeven Moneyness Price Value Value Price 20- e37-30p C785- 30t.8 Call $30.00 Dec- $7.85 S0.1N $0,8L38 30$3. 2019 n37-30, 8.60 - a1.60 (30t8.60) 17-Jan $8.60 Call $30.00 C387 30]3.6o 0.60) 40+.31) C38<4e340.3S (3० - 03) 38 302.69 30-0.78) 2020 MA37-40,d Lo.3r-0 $0.3 17-Jan 2020 Out $0.35 Call $40.00 82.3) MesX C30-37,0.3-0 $0.31 20- out Put $30.00 Dec- $8.31) 0.3) 2019 C30-37 Co.s- $0.78 40 17-Jan but 0.78 38 730]#29.22 Put $30.00 8.78) 2020 MAX Ao-37,06.S-3 140-6.80 17-Jan .8) Put $40.00 $6.80 2020 3.80 2 3 C38<40 33.20

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