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Unformatted text preview: rice is 18, both the call and the put option are worth 0 as the exercise price is equal to the
market value of the Nokia stock. When the stock price raises above €18 the buyer of the call option will
exercise the option and gain the difference between the stock price and the exercise price. Thus, the value
of the call option is €1, €2, and €3 if the stock price rises to €19, €20, and €21, respectively. When the
stock price is lower than the exercise price the buyer will not exercise and, hence, the value is equal to 0.
Vice versa with the put option. your chance
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75 Corporate Finance Options The value to the buyer of a call and a put options can be graphically illustrated in a position diagram: Put option value to buyer
with a €18 exercise price Call option value to buyer
with a €18 exercise price €2 €2
€18 €20 €16 €18
Share Price Share Price As the seller of a call and a put option takes the opposite...
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This note was uploaded on 10/26/2012 for the course 19 19 taught by Professor - during the Spring '12 term at Sunway University College.
- Spring '12