Time Value of Microsoft options
Quantitative Finance
Level
2
MSFT current stock price is $43.90. If you price the call option on the $42 strike with 3 days to expiry at $2.35, what is the time value of this option?
Image credit: Thinkorswim
$0.00
$1.90
$2.35
$0.45
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1 solution
S=$43.90
X=$42.00
Intrinsic value of call=max(S-X,0)=$1.90
Time value=Option value - Intrinsic value=$2.35-$1.90=$0.45