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This question is in bpp revision kit
I have to b just clear in the point that we are given with current share price of cathlyn ,£3.50
After we do call option as per question the answer of call option using bsop is 0.39
The answer ends here ..I m trying to understand what is the implications of this answer to the asked question …call option ..option to buy this share
So this 0.39 ( the value of buy this option) is representing what ?
Usually for real option when we use bsop to calculate call option or put option we add up to npv to see whether delaying ..exploiting or abandoning adds value ..I understand the bsop .but for the above it is otc option …but the results depict what ?? If the examiner asks to comments on that 0.39 what I should say
You must watch my free lectures on share options.
The 0.39 is the cost of the option. If you buy the option then you then have the right to buy shares at a fixed price of $3.30 in 3 months time.
Again, all of this is explained in the lectures – you cannot expect me to type them out here.
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