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