10 Part I: Basic Properties of Stock Options 
TABLE 1-3. 
XYZ option's values on the expiration day. 
XYZ July 50 Coll 
(Intrinsic) Value 
XYZ Stock Price ot Expiration 
40 
45 
48 
50 
52 
55 
60 
0 
0 
0 
0 
2 
5 
10 
The Call Option Price Curve. The call option price curve is a curve that 
plots the prices of an option against various stock prices. Figure 1-1 shows the 
axes needed to graph such a curve. The vertical axis is called Option Price. The 
horizontal axis is for Stock Price. This figure is a graph of the intrinsic value. 
When the option is either out-of-the-money or equal to the stock price, the 
intrinsic value is zero. Once the stock price passes the striking price, it reflects 
the increase of intrinsic value as the stock price goes up. Since a call is usually 
worth at least its intrinsic value at any time, the graph thus represents the min­
imum price that a call may be worth. 
FIGURE 1-1. 
The value of an option at expiration, its intrinsic value. 
~ 
it 
C: 
.Q 
15.. 
0 The intrinsic value line 
bends at the 
st~iking ~ 
pnce. ~ 
Stock Price