A stock is trading at $46.96 per share, and the 47.5 option is quoted at $5.60 bid and $6.00 ask. The next day the stock is up $2.87 on strong earnings. You see that the option had a theta of -.02 and a delta of .56. Based only on this information, how much extrinsic value should you expect the option's ask price to have? (Answer in dollars per share of option, i.e., 2.87 not 287).
A stock is trading at $46.96 per share, and the 47.5 option is quoted at $5.60 bid and $6.00 ask. The next day the stock is up $2.87 on strong earnings. You see that the option had a theta of -.02 and a delta of .56. Based only on this information, how much extrinsic value should you expect the option's ask price to have? (Answer in dollars per share of option, i.e., 2.87 not 287).
Chapter20: Financing With Derivatives
Section20.A: The Black-scholes Option Pricing Model
Problem 1P
Related questions
Question
A stock is trading at $46.96 per share, and the 47.5 option is quoted at $5.60 bid and $6.00 ask. The next day the stock is up $2.87 on strong earnings. You see that the option had a theta of -.02 and a delta of .56. Based only on this information, how much extrinsic value should you expect the option's ask price to have? (Answer in dollars per share of option, i.e., 2.87 not 287).
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 4 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning