> 3. ... if you forfeit $1 of income and the strike price of options is $1, ...
Does this example need another prerequisite "and the current price of NFLX is $1"? Because if the example runs with NFLX at, say $10, then each option already have an intrinsic value of $9.
And combined with #5, those options look like at-the-money call options that expire in 10 years. But in this case it won't make any sense to set the option price (the amount of income to forfeit for each option) according to either strike price or stock price -- shouldn't it be set according to the difference between the two?
Does this example need another prerequisite "and the current price of NFLX is $1"? Because if the example runs with NFLX at, say $10, then each option already have an intrinsic value of $9.
And combined with #5, those options look like at-the-money call options that expire in 10 years. But in this case it won't make any sense to set the option price (the amount of income to forfeit for each option) according to either strike price or stock price -- shouldn't it be set according to the difference between the two?