Question

You own eight call option contracts on swift water tours stock with a strike price of $15. when you purchased the shares the option price was $0.30 and the stock price was $15.25. what is the total intrinsic value of these options if the stock is currently selling for $16.08 a share?

A. $1.08
B. $0
C. -$108
D. $83
E. -$1.08
F. $300
G. $108
H. -$300
I. -$864
J. $864
K. -$83
L. $0.30

Answer 1

The total intrinsic value of eight call option contracts on Swift Water Tours stock with a strike price of $15 and a current stock price of $16.08 is $864.

Step-by-step explanation:

The question asks for the total intrinsic value of eight call option contracts on Swift Water Tours stock with a strike price of $15 when the current stock price is $16.08.

To find the intrinsic value, you need to subtract the strike price from the current stock price, provided that the current stock price is above the strike price. So, the intrinsic value per share is $16.08 - $15.00 = $1.08.

Since each option contract typically covers 100 shares, the intrinsic value per contract is 100 shares × $1.08. Thus, for eight contracts, the total intrinsic value is 8 contracts × 100 shares/contract × $1.08/share. The calculation results in a total intrinsic value of $864.