You have taken a long position in a call option on IBM common stock.
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You have taken a long position in a call option on IBM common stock. The option has an exercise price of $136 and IBM's stock currently trades at $140. The option premium is $5 per contract.
a) What is your net profit on the option if IBM's stock price increases to $150 at expiration of the option and you exercise the option?
b) How much of the option premium is due to intrinsic value versus time value?
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Solution Summary
Calculating profit on a call option and intrinsic value of a call option is explained. Work and calculations are shown.
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You have taken a long position in a call option on IBM common stock. The option has an exercise price of $136 and IBM's stock currently trades at $140. The option premium is $5 per contract.
a) What is your net profit on the option if IBM's stock price increases to $150 ...
Purchase this Solution
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