Options normally trade abv intrinsic values If trade below intrinsic value

Options normally trade abv intrinsic values if trade

This preview shows page 4 out of 4 pages.

Options normally trade abv intrinsic values. If trade below intrinsic value, arbitrageurs could realize immediate trading profits by purchasing the options & exercising them. Value of Call option : min(intrinsic value), max(stock price) Value of Put option : min(intrinsic value), max(exercise price) Put-Call Parity (to find value of option) C + PV ( X )= S + P C + X /( 1 + r f ) T = S 0 + P , C: price of call, PV(X): present value of exercise price, S: price of underlying stock, P: price of put P=0 when finding value of call ; C=0 when finding value of put Call Option value
Image of page 4

You've reached the end of your free preview.

Want to read all 4 pages?

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

Stuck? We have tutors online 24/7 who can help you get unstuck.
A+ icon
Ask Expert Tutors You can ask You can ask You can ask (will expire )
Answers in as fast as 15 minutes