Ch. 9 Options Pricing Flashcards
1
Q
Options Premium
A
Market price of an option
2
Q
2 components of Option prices
A
Time value & Intrinsic Value
3
Q
Intrinsic Value
A
Option “in money”
4
Q
Time Value
A
amount of time remaining before the contract expires
5
Q
Call scenarios
A
“in” (Mkt > XP)
“at” (Mkt = XP)
“out” (XP > Mkt)
6
Q
Put scenarios
A
“in” (XP > Mkt)
“at” (=)
“out” (Mkt > XP)
7
Q
Call up Put down
A
Calls “in” when mkt above strike
Puts “in” when mkt below strike
8
Q
When does a call contract have no intrinsic value?
A
“at” or “out”
9
Q
When does a put contract have no intrinsic value?
A
“at” or “out”
10
Q
Premium =
A
Intrinsic + Time
