Question

Last week, you purchased a call option on a stock with a strike price of $35. The stock price was $33.30 and the option price was $.35 at that time. What is the current intrinsic value per share if the stock is now selling at $36.60 a share?

$1.25

$3.30

$1.60

0

Answer 1

Answer: $1.60

Intrinsic value is the extend to which the option is in the money, if it is in the money. In this case the option is in the money as the current stock price is more than the strike price. In call option the buyer of option have the right to buy.and he will exercise the option when stock price is more than the strike price, which is profitable to him. For a call option

Intrinsic Value = Market price - Strike price

= 36.60 - 35

= 1.60