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[answered] 2. (TCO D) An investor bought stock at $50 and sold a cover


2.?(TCO D) An investor bought stock at $50 and sold a covered call with a 55 strike price for $2. The stock now sells for $60.

Part 1: What is the intrinsic value in the option? Assume the call is priced at $7.?
Part 2: What is the time value in the option??
Part 3: What would you expect to happen to the value of the call and the 55 put if a shock to the market causes volatility to increase dramatically?


Call Option

 

Current price of stock$50

 

Exercise price(x) =$55

 

Price at expiration (S) =$60

 

Premium (c) =$2

 

Part 1: What is the intrinsic value in the option? Assume the call is priced at $7.

 

Payoff...

 


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