What is the intrinsic and time value for the put option premium with a strike price of $70/barrel and expiry date December 2021? 2. What is the intrinsic and time value for the put option premium with a strike price of $69/barrel and expiry date March 2022?
What is the intrinsic and time value for the put option premium with a strike price of $70/barrel and expiry date December 2021? 2. What is the intrinsic and time value for the put option premium with a strike price of $69/barrel and expiry date March 2022?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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1. What is the intrinsic and time value for the put option premium with a strike price of $70/barrel and expiry date December 2021?
2. What is the intrinsic and time value for the put option premium with a strike price of $69/barrel and expiry date March 2022?
Transcribed Image Text:WTI crude oil put premium quotes ($/barrel)
Strike price ($/barrel)
Oct '21
Dec '21
Mar '22
69.00
1.00
4.20
7.10
69.50
1.10
4.30
7.30
70.00
1.20
4.62
7.90
70.50
1.49
4.92
8.20
Current futures prices ($/barrel): Oct 70.01; Dec 69.78; Mar 69.40.
Contract size: 1000 barrels
Expert Solution
Step 1
Intrinsic value of put option =Expiration price-strike price
Time value of option=Premium- Intrinsic value
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