Q2. Underlying priced at 200 with MAD of 40. (15 points) Q2a. What is the...
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Q2. Underlying priced at 200 with MAD of 40. (15 points)
Q2a. What is the probability of option expiring ITM for a 160 CALL? (3 points)
Q2b. What is the average underlying price when CALL expires ITM? (3 points)
Q2c. How much should the 160 CALL be priced at? (3 points)
Q2d. Out of the price in Q2c, how much of that is intrinsic value and how much is time value? (3 points) Hint: intrinsic value is the value of option if option expires NOW. Time value is the remaining.
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