Examine the data in the table below.
Given that both stocks trade for $50 and both options have a $45 strike price and a July expiration date, can we say that the option of Company A is overvalued or that the option of Company B is undervalued? Why or why not?
|
Company
|
Stock Price
|
Expiration
|
Strike Price
|
Call Price
|
|
A
|
$ 50
|
July
|
$ 45
|
$ 7.50
|
|
B
|
50
|
July
|
45
|
6.75
|