Use the option quote information shown here to answer the questions that follow.

Question

Use the option quote information shown here to answer the questions that follow. The stock is currently selling for $63.

Two of the options are clearly mispriced. Which ones? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer

and double click the box with the question mark to empty the box for a wrong answer.)

Use the option quote information shown here to answer the questions that follow. The stock is currently selling for $63.

Explanation / Answer

Part a-1

Here the current price is 63 and strike price is 57. Since the current price is greater than strike price, the call options are in the money.

Current price > strike price => In the money

Current price = strike price => On the money

Current price < strike price => Out of the money

Part a-2

Intrinsic value = max (current price – strike price,0)

                                = max(63-57,0)

                                = 6

Part b-1

Here the current price is 63 and strike price is 57. Since the current price is greater than strike price, the put options are out of the money.

Part b-2

Intrinsic value = max ( strike price - current price,0)

                                = max(57-63,0)

                                = 0

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