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A call option on Bedrock Boulders stock has a market price of 7 The stock sells for 30 a share and the option has an exercise price of 25 a share What is the exercise value of the call option?
Wiki User
∙ 14y ago
There's intrinsic value and extrinsic value in options.
Intrinsic value is the either the stock price minus the exercise price, or the other way around depending on which way the stock is going to travel. In the case of this call, if I exercised at $25 and sold at $30, the intrinsic value is $5 per share.
To calculate extrinsic value, subtract the premium from the intrinsic value. On this deal, you paid seven dollars to make five so the exercise value, or extrinsic value, of this option is negative two dollars. The idea of buying calls is to MAKE money so most people would look at this one close: is the stock going to clear $32 before the option expires? Thirty-two dollars is the break-even point so if you couldn't be sure of being able to sell the stock for more than that you'd be best off to pass on the deal.
Wiki User
∙ 14y ago
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What causes an increase in the value of an option?
An increase in the market price of the item the option is for.
What time does the option market close?
4 pm ET
When you exercise a stock option to buy it is this a taxable event?
Not necessarily. On the date you exercise the option, you need to record the difference between what you paid for the stock by exercising your options and the fair market value of the stock when you bought it. That's used for calculating your alternative minimum tax if you hold the stock over a year, but it's not used for calculating ordinary income tax. Depending on how big a spread there is and how much stock you got, this could be a nontaxable thing or it could really whack you.
How do you determine whether the currency option is in the money?
"In the Money" is a term used in option trading as a determinate to if an option has "Intrinsic Value." In the Money, does NOT mean in profit. There are two components to an option value, TIME VALUE, and INTRINSIC VALUE. Time Value + Intrinsic Value = Option Premium. When the market price is above the option strike price of a CALL option, that option is considered "In the Money" i.e. having intrinsic value. When the market price is below the option strike price of a PUT option, that option is considered "In the Money" i.e. having intrinsic value.
Which is NOT a right that the Certifying Officer can exercise in order to maintain the integrity of the certification process and minimize his or her pecuniary liability?
The option to reverse a voucher certification and disbursal of funds.
What is excersing a option?
Exercising an option means exercising your rights to buy or sell the underlying asset in accordance to the parameters of the option. When you exercise a call option, you will get to buy the underlying stock at the strike price no matter what price the stock is trading at in the market. When you exercise a put option, you will get to sell the underlying stock at the strike price no matter what price the stock is selling at in the market. In both cases, the option you own disappears from your account.
What does it mean that a stock option is in the money?
An in-the-money option is one that makes financial sense to exercise. In-the-money puts are ones where the security's open-market price is lower than the option's strike price. In-the-money calls are ones where the security's open-market price is higher than the option's strike price.
Why does the US buy more foreign goods than they sell?
To buy foreign goods or services, depending on which the option rate or the current market rate is more favorable, the owner may exercise the option or let the option
What types of indoor exercise equipment are available on the market?
There are countlesss types of indoor exercise equipment. A good option could be a stepper. It is small enough to fit under the couch but helps in toning the marvelous muscles.
How does the put option values fall and rise while call options values rise and fall as the rerlevant stock prices rises?
The Payoff i.e. profit for a Call Option is St-X where St is the market price at time t and X is the exercise price. Assuming that it is an American Style option where it can be exercised at any time, If St is significantly greater than the exercise price,X, (the agreed price to buy an option at) then if the option holder exercises it immediately they will be 'in-the-money.' This means it has a high intrinsic value which causes a rise in value for the option. The Payoff for a Put Option is X-St where X=exercise price and St equals market price at time t. If the market price increases the gap between X and St (Payoff or Profit) reduces or if X<St then they will be making a loss. This will mean it will have a low intrinsic value (value if exercised immediately) therefore the value of the option will fall.
When should you not exercise a call option?
You certainly should not exercise a call option when the stocks price is above the strike price. If you really want the stock, go and buy it at the market price. For example, if you own an option with a strike price of $15 and the stock is trading at $9, why would you pay $15 to buy a stock that you could only buy or sell for $9. That would be irrational.
What causes an increase in the value of an option?
An increase in the market price of the item the option is for.
Difference between American option and European option?
The only difference between American Options and European Options is that the American Option allows you to exercise the option anytime before and up to expiration while European options only allow you to exercise the option upon expiration. Both options can be freely bought and sold before expiration.
What is The market development option that brings the highest risk?
No
What Is an Underlying Asset in binary options?
An option's underlying asset is a market traded asset, such as currency exchange rate, stocks or bonds, and market indices. Fluctuations in the market value of an underlying asset serve as the basis for the value of an option vis-à-vis an option's strike price.
What time does the option market close?
4 pm ET
What is the Relationship between option price and exercise price?
For a call option, the option price is convex and decreasing with increasing strike price, assuming a fixed maturity and same underlying price.
