Economics Help?

Suppose that mid-east terrorists crashed a stolen corporate jet full of nerve gas into Disneyworld. Would the intrinsic value of “at the money” stock index put and call options change? (‘at the money’ options are options with a strike price equal to the current market price of their underlying financial instrument or index) If not, explain why not. If so, how would the intrinsic value change for each of these options?

Answer:
Presumably such a terrorist attack would cause stock index values to fall.

Consequently, the intrinsic value of stock index PUT options would RISE (since exercising the put options would become profitable because the strike price RECEIVED upon exercising them would then be higher than the value of the stock index).

The intrinsic value of stock index CALL options, on the other hand, would remain UNCHANGED (at ZERO, since the call options simply would not be exercised, with the strike price above the value of the stock index).
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