The exercise price on one of O\'s corp. call options is $35 and the price of the

Question

The exercise price on one of O's corp. call options is $35 and the price of the underlying stock is $34. The option will expire in 55 days. The options is currently selling for $.25.
a. calculate the options exercise value
b. calcualte the value of the premium over and above the exercise value? what does this value represent?
c. is this and out of the money option or in the money option. why?
d. what will happen to the value of the option if the underlying stock price changes to 34.50?
e. if this were a put option, would it have a greater or lesser value than the call option? why?

Explanation / Answer

a. exercise value $3500 b. c. out of the money d. rise e. 2 answers, 1, according to call/put parity calls have greater value then puts however, if the strike is 35 and the underlying stock price is currently $34 then a 35put would have more value than a 35call because the 35put is in the money

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