12 Part I: Basic Properties of Stock Options 
Example: On January 1st, XYZ is selling at 48. An XYZ July 50 call will sell for more 
than an April 50 call, which in turn will sell for more than a January 50 call. 
FIGURE 1-2. 
Six-month July call option (see Table 1 ·4). 
.g 
a. 
C 
0 
a 
11 
10 
9 
8 
7 
6 
5 
Greatest 
Value for 
Time Value 
Premium 
0 4 ----------------------
3 
2 
0 
FIGURE 1-3. 
40 45 
represents the option's 
time value premium. 
--------L---------50\ 55 60 
Stock Price Intrinsic value 
remains at zero 
until striking price 
is passed. 
Price Curves for the 3-, 6·, and 9-month call options. 
/ 
Intrinsic Value 
9-Month Curve 
Striking Price 
Stock Price 
As expiration date draws 
closer, the lower curve 
merges with the intrinsic 
value line. The option 
price then equals its 
intrinsic value.