Unformatted text preview: whereas the decision to sell a call
option is a short position.
If the exercise price of a option is equal to the current price on the asset the option is said to be at the
money. A call (put) option is in the money when the current price on the asset is above (below) the
exercise price. Similarly, a call (put) option is out of the money if the current price is below (above) the
With respect to the right to exercise the option there exist two general types of options:
– American call which can be exercised on or before the exercise date
– European call which can only be exercised at the exercise date Download free ebooks at bookboon.com
74 Corporate Finance Options 9.1 Option value
The value of an option at expiration is a function of the stock price and the exercise price. To see this
consider the option value to the buyer of a call and put option with an exercise price of €18 on the Nokia
Stock price €15 €16 €17 €18 €19 €20 €21 Call value 0 0 0 0 1 2 3 Put value 3 2 1 0 0 0 0 If the stock p...
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