Explain why an options time value is greatest

Reference no: EM131326123

Explain why an option's time value is greatest when the stock price is near the exercise price and why it nearly disappears when the option is deep-in- or out-of-the-money?

Critique the following statement, made by an options investor: "My call option is very deepin-the-money. I don't see how it can go any higher. I think I should exercise it."

Reference no: EM131326123

Questions Cloud

Purposes of global economic comparison : While the location of the most advanced region or nation varied over time, this was merely change within an overall system which, can for purposes of global economic comparison with other empires and regions, be treated as a unity." Critically di..

What was the hospitals original profit forecast : What was the hospital's original profit forecast (assume away any issues with depreciation, taxes, etc.)? Halfway through the fiscal year, what is the hospital's revised projection for FY11 profits?

Output and per capita income growth : 1. Outline some of the dominant patterns of population, output and per capita income growth and/or decline in the world economy, 500-1750, and what factors most fundamentally explain these patterns.

Write a report to evaluate its buying process from marketer : Every product or service has a buying process, even digital products and services. In this assignment, you will research and analyze the buying process for an online product or service, with which you (as a consumer) are familiar, from a business ..

Explain why an options time value is greatest : Explain why an option's time value is greatest when the stock price is near the exercise price and why it nearly disappears when the option is deep-in- or out-of-the-money?

Formula for the is curve : If consumption is given by C = 200 + 0.75(Y - T) and investment is given by I = 200 - 25r, then the formula for the IS curve is:

What are the security issues with wireless telephony : What are the security issues with Wireless telephony? What solutions were implemented if any to address those issues

Why is given value irrelevant for an american put : The value Max[0, X(1 + r)-T - S0] was shown to be the lowest possible value of a European put. Why is this value irrelevant for an American put?

Prepare the journal entries for the given transactions : Prepare the journal entries for the following: May 3 - Received cash from clients as advanced payment for services to be provided and recorded as unearned fees $4500.

User Account

All Pages