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+The Intelligent Investor’s Guide to Option Pricing  •  73
+With this happy news story, our call options went from nearly 
+worthless to worth quite a bit—the increase in volatility amplified the 
+rising stock price and allowed us to profit from changes to two drivers of 
+option pricing.
+There is an important follow-up to this happy story that is well worth 
+keeping in the back of your mind when you are thinking about investing 
+in possible takeover targets using options. That is, our BSM cone widened 
+a great deal when the announcement was made because the market be-
+lieved that there might be a higher counteroffer or that the deal would fall 
+through. If instead the announcement from DuPont was that it had made 
+a friendly approach to the ABC board of directors and that its offer had 
+already been accepted, uncertainty surrounding the future of ABC would 
+fall to zero (i.e., the market would know that barring any antitrust con-
+cerns, DuPont would close on this deal when it said it would). In this case, 
+implied volatility would simply fall away, and the call option’s value would 
+become the intrinsic value (in other words, there is no potential or time 
+value left in the option). The situation would look like this:
+20
+30
+40 Stock Price
+50
+60
+70
+Agricultural Boron Co. (ABC)
+80
+GREEN
+We would still make $5 worth of intrinsic value on an invested base 
+that must have been very small (let’s say $0.50 or so), but were the situation 
+to remain uncertain, we would make much more.