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