The common shares of Twitter, Inc. (TWTR) recently traded on the NYSE for $19.50 per share. You have employee stock options to purchase 1,000 TWTR shares for $17.5 per share. The options expire in three years. Assume that the annualized volatility of TWTR stock is 86.4 percent and that the interest rate is 3.0 percent. (Assume the options are European options that may only be exercised at the maturity date.)
a. Is this option a call or a put?
b. What is the estimated value of the options if their maturity is six months instead of three years?
c. What is the estimated value of the options if their maturity is three years, but TWTR's volatility is 61.0 percent?
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The common shares of Twitter, Inc. (TWTR) recently traded on the NYSE for $19.50 per share. You have...
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