Question: What is a call option? A put option? Under what circumstances might you want to buy each? Which one has greater potential profit? Why? What

  1. What is a call option? A put option? Under what circumstances might you want to buy each? Which one has greaterpotentialprofit? Why?
  2. What is the intrinsic value of a call option? How do we interpret this value?
  3. What is the value of a put option at maturity? Based on your answer, what is the intrinsic value of a put option?
  4. If the risk of a stock increases, what is likely to happen to the price of call options on the stock? To the price of put options? Why?

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