Asked by Madison Bradford on Jul 12, 2024
Verified
Before expiration, the time value of an in-the-money put option is always
A) equal to zero.
B) negative.
C) positive.
D) equal to the stock price minus the exercise price.
E) None of the options are correct.
Time Value
The additional amount an investor is willing to pay for an option above its intrinsic value, based on the time remaining until its expiration.
Put Option
A financial contract that gives the holder the right, but not the obligation, to sell a specified amount of an underlying asset at a set price within a specified timeframe.
In-The-Money
A term used in options trading to describe an option that has intrinsic value, where the strike price is favorable compared to the current market price of the underlying asset.
- Recognize the impact of expiration on the time value of both call and put options.
Verified Answer
Learning Objectives
- Recognize the impact of expiration on the time value of both call and put options.
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