Gamuda stock is trading at $41

Finance Dec 24, 2020

Gamuda stock is trading at $41. Call options with a strike price of $44 are priced at $0.40. Calculate the intrinsic value and the time value of the option

Expert Solution

Intrinsic value:

Here the call option is out of the money i.e current trading price of the stock is less than the strike price.

Every out of the money options have no intrinsic value.

So here INTRINSIC VALUE is ZERO.

Time value:

Time value = option premium- intrinsic value

Time value = 0.40- 0

Time value = $0.40

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