You think the intrinsic value of Biogen Pharmaceuticals stock is somewhere around $300 a share. At the

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Question:

You think the intrinsic value of Biogen Pharmaceuticals stock is somewhere around $300 a share. At the same time, you see they only trade at $250 a share on the NASDAQ market. $250 is more money than you want to risk. As a result, you decide the buy a call option instead. Since the company is on the hunt for a vaccine against SARS-Cov-2, the realized volatility on the company stock is high at 35% but the implied volatility is even higher at 40%.

You have decided to select a 6-month option with a strike price of $260. Biogen pays a dividend of $3.75 a share and T-Bills pay a tiny yield of just 0.2%.

1) Estimate the market value of the call option.
2) What is the Delta of the option?
3) What is the Gamma of the option
4) What is the Vega of the option?
5) What is the Theta of the option?
6) What is the break-even price? (This is the price at which you can sell the option at expiration and break even.)