Exam 21: Option Valuation

An American-style call option with six months to maturity has a strike price of $35.The underlying stock now sells for $43.The call premium is $12. If the option has delta of.5, what is its elasticity?

Other things equal, the price of a stock put option is positively correlated with which of the following factors?

If the hedge ratio for a stock call is 0.70, the hedge ratio for a put with the same expiration date and exercise price as the call would be

An American-style call option with six months to maturity has a strike price of $42.The underlying stock now sells for $50.The call premium is $14. What is the intrinsic value of the call?

Other things equal, the price of a stock call option is positively correlated with the following factors except

The intrinsic value of an in-the-money put option is equal to

An American-style call option with six months to maturity has a strike price of $35.The underlying stock now sells for $43.The call premium is $12. If the company unexpectedly announces it will pay its first-ever dividend three months from today, you would expect that

The hedge ratio of an option is also called the option's

Options sellers who are delta-hedging would most likely

A portfolio consists of 800 shares of stock and 100 calls on that stock.If the hedge ratio for the call is 0.5, what would be the dollar change in the value of the portfolio in response to a $1 decline in the stock price?

A hedge ratio for a call is always

If the hedge ratio for a stock call is 0.50, the hedge ratio for a put with the same expiration date and exercise price as the call would be

Portfolio A consists of 400 shares of stock and 400 calls on that stock.Portfolio B consists of 500 shares of stock.The call delta is 0.5.Which portfolio has a higher dollar exposure to a change in stock price?

The time value of a call option is I) the difference between the option's price and the value it would have if it were expiring immediately. II) the same as the present value of the option's expected future cash flows. III) the difference between the option's price and its expected future value. IV) different from the usual time value of money concept.

An American call-option buyer on a nondividend-paying stock will

Before expiration, the time value of an in-the-money call option is always

Use the two-state put-option value in this problem.S_O = $100; X = $120; the two possibilities for S_T are $150 and $80.The range of P across the two states is _____, and the hedge ratio is _______.

Prior to expiration,

Lower dividend-payout policies have a __________ impact on the value of the call and a __________ impact on the value of the put compared to higher dividend-payout policies.

Empirical tests of the Black-Scholes option pricing model