Follow these instructions and answer all of the questions:
Select 2 of your 10 stocks and locate prices for the stocks and call options on those stocks. Select the 3 call options for the abc descriptions below:
a) A call whose strike price exceeds the price of the stock (an out of the money call)
b) A call whose strike prices approximates the price of the stock (an at the money call)
c) A call whose strike price is less than the price of the stock (an in the money call)
Questions:
What is the intrinsic value of each option a) b) and c)?
What is the time premium paid for each option?
What is the max you could lose if you bought each option?
What is the max you could lose if you bought the underlying stock (in a lot of 100)?
45 minutes of work are added for calculations, you should explain your answers.
