Question

​[Related to the Making the Connection

LOADING...

​] Use the following information on call and put options for Facebook to answer the questions below.

Facebook                                                                                                          Underlying stock​ price: 21.95
		Call			Put
Expiration	Strike	Last	Volume	Open Interest	Last	Volume	Open Interest
Oct	17.00	5.00	21	​ 3,064	0.02	13	​14,427
Nov	17.00	5.20	44	795	0.40	485	​13,098
Jan	17.00	5.50	1	691	0.55	231	​ 7,381
Apr	17.00	5.70	2	​ 1,409	1.15	69	​ 7,289
Oct	18.00	4.00	49	​ 4,762	0.07	154	​ 22,337
Nov	18.00	4.44	37	​ 4,047	0.50	4426	​ 16,197
Jan	18.00	4.50	10	943	0.80	409	​ 13,754
Apr	18.00	5.22	31	712	1.45	60	​ 6,659

The

intrinsic value of the call option that expires in April and has a​ $17 strike price is

​$4.954.95.

​(Round your response to two decimal​ places.)

The intrinsic value of the put option that expires in January and has a​ $18 strike price is

​$00.

​(Round your response to two decimal​ places.)

Why would a call with a​ $18 strike price sell for less than a call with a​ $17 strike price​ (for all expiration​ dates) while a put with a​ $18 strike price would sell for more than a put with a​ $17 strike price​ (for all expiration​ dates)? ​(Check all that​ apply.)

A.

The​ $18 put is more expensive than the​ $17 put because the stock price will reach​ $17 before it hits​ $18, making the option less valuable at​ $95 than​ $105.

B.

The​ $18 call is cheaper than the​ $17 call because the stock price will reach​ $17 before it hits​ $18, making the option more valuable at​ $17 than​ $18.

C.

The​ $18 put is more expensive than the​ $17 put because the stock price will reach​ $17 before it hits​ $18, making the option more valuable at​ $17 than​ $18.

D.

The​ $18 call is cheaper than the​ $17 call because the stock price will reach​ $17 before it hits​ $18, making the option less valuable at​ $17 than​ $18.

Answer 1

here the option number

A.

The​ $18 put is more expensive than the​ $17 put because the stock price will reach​ $17 before it hits​ $18, making the option less valuable at​ $17 than​ $18.

And

B.

The​ $18 call is cheaper than the​ $17 call because the stock price will reach​ $17 before it hits​ $18, making the option more valuable at​ $17 than​ $18.

Are the correct option the reason is that the call option gives us right to purchase the stock at certain price hence as that price is lower the option will have higher value so the d. is correct for call option.