If you purchase a 100 call when the stock is trading $95 and the stock trades up to $110, will you have to exercises the call to collect on your win?
False, your investment bank will automatically do this for you.
Once you make an option trade you must hold onto it until expiration?
False, you can take the position off at any time, up until expiration, at the prevailing market price.
If stock XYZ is trading $55 and one 50 strike call is priced at $6.50, how much intrinsic value would the option have?
Intrinsic value equals the actual value the option would have if exercised today. The 50 strike price call would have $5 of intrinsic value with the stock trading $55. The other $1.50 would be time value.
If stock ABC is trading $25 and one 30 strike price put is priced at $5.75, how much time value would this option have?
A 30 strike price put would start gaining intrinsic value once it trades under $30. In this case, with the stock $25, this position would have $5 of intrinsic value. So if the option price is $5.75 and $5 is intrinsic value, then the other $.75 would be time value.
A 50 strike price call that expires in 2 months will cost more than a 50 strike price call that expires in 3 months?
False, the more time an option has the more time value it will have. So a 3 month option will cost more than a 2 month option at the same strike price.
