1. Consider a put option trading at $4.10 expiring next week. The exercise price of this option is $35 while the underlying stock is currently trading at $38. What is the intrinsic value of this option? What is the time value?
2. Consider a call option with an exercise price of $35 trading at $10. You notice that shares of the underlying stock are trading at $50. What is wrong here? How would you take advantage of this mispricing if the option expires today?