A call option has a strike price of $65 and is selling for $5 in the market. The underlying asset is trading at $68. What is the intrinsic value and time value respectively, of this option?
A) Intrinsic value $0, Time value $0
B) Intrinsic value $0, Time value $5
C) Intrinsic value $2, Time value $3
D) Intrinsic value $3, Time value $2
E) Intrinsic value $3, Time value $5

Question

Quizplus · Accepted Answer

The intrinsic value of a call option is the difference between the underlying asset's current price ($68) and the strike price ($65), which is $3. The time value is the difference between the option's market price ($5) and its intrinsic value ($3), which is $2.

A Call Option Has a Strike Price of $65 and Is