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Friday, September 24, 2010

Update on my Gold Sept 30 2010 123 call option

Gold is currently (11:16 am) trading at $126.71.

The call's strike price is $123.

$126.71 - $123.00 = $3.71

current bid for call option = $3.75

current ask for call option = $3.85

Prices of options are made up of two parts:

1) INTRINSIC VALUE = difference between current price of stock and strike price

2) TIME VALUE = how much time do we have left until expiration?

That's the reason this call price is HIGHER than $3.71. The option does not expire until 9/30.