Question

A crude oil call option has an exercise price of $48 when its spot price is...

  1. A crude oil call option has an exercise price of $48 when its spot price is $46.29. If the call option is trading at $0.58, what is its intrinsic value?
  2. $0
  3. $0.58
  4. $1.71
  5. $46.87
  6. $47.42
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Answer #1
Intrinsic value of option is the difference between stock price and the exercise price of the option
Intrinsic value of call option = 46.29 - 48
Intrinsic value of call option -$1.71
Since the value calculated above is negative it means it is not in the money call option since the stock is available at cheaper rate in the market then if the option is exercise
Therefore the intrinsic value of call option is 0
Correct answer is $0
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