Can we talk now?

[Car'a'carn]

They will probably post it soon (1 or 2 weeks), that's how it was in the past.

[Allacalander]

Originally Posted by Car'a'carn

Have you forgotten that option's value can not be less than the intrinsic value?

Oh yeah. Good point. However does that always hold or just hold under theoretical idealized conditions?

Because the prices I mentioned for that stock I found were definitely less than their intrinsic value.

I looked it up and I think that is only true for American options.

[chicago_buy]

Originally Posted by Allacalander

Alright let's figure this out. Let's consider first that $25 buys you a floor at $125 for 100 shares of stock at 5 years in the future. You are right that at the time you buy the option it is in the money and its intrinsic value is $25/share or $2,500 ($2,475 after the option cost). It sounds like a good deal, but remember you can't exercise for 5 years and the stock is expected to grow during those five years. In fact, it only has to return 25% over 5 years (not per year) for the option to expire worthless. A reasonable outcome for a stock. Not to mention the fact that you just lost control of your $25 for 5 years and any interest you could have earned on it.

Now let's look at the other persepctive. Let's say you bought the same put at $25, but that it only covers one share, so you have to purchase 100 options to get the same protection as above. This is at a cost of $2500 which exactly matches the intrinsic value of $2500. I find this exact match highly implausible.

I agree the way I looked at it makes the option seem too cheap, but I think your perspective makes the option look too expensive.

I looked up an actual stock in Yahoo finance, APA, which is approx $100/share. The current put at $125 is 23.90. That would seem to cover one share, since that option is in the money, BUT that option expires in 2 weeks. I find it hard to believe a 5 year option would have close to the same price for a single share.

Clearly when the question maker picked the values they were made up values slightly close to realistic values.

2 week expiration for APA @ strike 125 is 23.90, 5 years expiration will be more expensive because of extra time remaining - something like 50-60$ ( I am just guessing numbers). ( I think someone already mentioned this in a different way)

[RY]

Anyway, does anyone know the percentage that was required to pass the FSA exam in the past?

[Car'a'carn]

Originally Posted by RY

Anyway, does anyone know the percentage that was required to pass the FSA exam in the past?

http://www.soa.org/files/pdf/edu-arc...er-results.pdf

[Car'a'carn]

Originally Posted by Allacalander

Oh yeah. Good point. However does that always hold or just hold under theoretical idealized conditions?

Because the prices I mentioned for that stock I found were definitely less than their intrinsic value.

I looked it up and I think that is only true for American options.

American only true, but in your example you paid 25 for a contract, hose intrinsic value was 2,500 at the moment.

[hamstrman]

Looked back and exam questions have come out 11 days after the exam date (minus two weekends = 7 business days). So if it follows the pattern, they should be out today. But they won't be... because they should be.

[hamstrman]

*sigh* Timing fail.

[hamstrman]

http://www.soa.org/files/pdf/edu-201...elease-sch.pdf

10 weeks!? WHY!? They said it hadn't been 10 weeks for quite a while! And meanwhile, the week prior doesn't even have the holiday! It was said here once - by Bruce? (Bruce, correct me if I'm wrong) - that "Why would we wait an extra week because of a holiday?" to paraphrase.

Harumph!

[Boots]

Originally Posted by hamstrman

http://www.soa.org/files/pdf/edu-201...elease-sch.pdf

10 weeks!? WHY!? They said it hadn't been 10 weeks for quite a while! And meanwhile, the week prior doesn't even have the holiday! It was said here once - by Bruce? (Bruce, correct me if I'm wrong) - that "Why would we wait an extra week because of a holiday?" to paraphrase.

Harumph!

Eh, if it takes 2 weeks more, it's ok. Sit back, relax, and enjoy some of your avatar