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What is the intrinsic value in the option

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Reference no: EM131512997

An investor bought stock at $40 and sold a covered call with a 45 strike price for $2. The stock now sells for $50.

Part 1: What is the intrinsic value in the option? Assume the call is priced at $7.

Part 2: What is the time value in the option?

Part 3: What would you expect to happen to the value of the call and the 55 put if a shock to the market causes volatility to increase dramatically?

Reference no: EM131512997

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