You have taken a long position in a call option on IBM common stock. The...
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You have taken a long position in a call option on IBM common stock. The option has an exercise price of $139 and IBM's stock currently trades at $145. The option premium is $7 per contract.
| How much of the option premium is due to intrinsic value versus time value? |
| Option Premium | |
| Intrinsic value | $ |
| Time value | |
| b. | What is your net profit on the option if IBMs stock price increases to $155 at expiration of the option and you exercise the option? (Negative amount should be indicated by a minus sign.) |
| Net profit | $ per share |
| c. | What is your net profit if IBMs stock price decreases to $135? (Negative amount should be indicated by a minus sign.) |
| Net profit | $ per share |
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