Suppose you are offered an option on an asset.

Suppose you are offered an option on an asset.

Suppose you are offered an option on an asset. This option gives you the right to buy the asset for $1,000 any time before December 31st of this year.
Currently, this asset is worth $800.

a. Is this a call option or a put option?

b. What determines the value of this option?

c. Currently, is this option “at-the-money,” in-the-money,” or “out of- the money”?

d. Since the exercise price is more than the asset’s value today, does this mean the option is worthless? Explain.

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