The Standard and Poor’s 100
index closed on August 20 at 536.04. The Wall Street
Journal quotes the closing premium for the OEX September
510 call at 28.90. What is the time value of the
The correct answer is a.
First, remember that OEX is the symbol for the S&P
100 index. The premium in an options contract is
composed of both intrinsic value and time value.
The intrinsic value of the Sept 510 call is 26.04
since the index closed at 536.04. In a call, subtract
the strike price from the market price to find intrinsic
value (536.04-510 = 26.04). Subtract the intrinsic
value from the premium to find the time value (28.90-26.04