Question

On 2020/May/08, the US 500 2925 Call (Expiry Date is 18/12/20; Strike Price is 2925.00) is trading at 248.78 USD per 1 option. And the current US 500 stock index is 2915.79 (in the money option / at the money option / out of We usually call this option is currently a _ the money option) And if the time has come to 2020/Nov/18, the US 500 stock index is still at 2915.79, then the option price is more likely to be (higher / lower/ same) then the price of 248.78 USD per 1 option. If we buy 1 Option (the US 500 2925 Call (Expiry Date is 18/12/20; Strike Price is 2925.00)) on 2020/May/08 and on 2020/Dec/18, the US 500 stock index closed at 3100.00 The profit of buying this option is

Answer 1

1). This option is currently out of the money. (It is a call option with the US index stock price lower than the call exercise price so it won't be exercised since call option payoff = max(stock price - exercise price, 0))

2). The option price is likely to be lower because the time value of money will decrease as the option nears expiry whereas its intrinsic value is still zero as it is out of the money.

3). Loss = max(stock price - exercise price, 0) - option price

= max(3,100 -2,925, 0) - 248.78 = -73.78