Which of the following statements is correct? (a) An option\'s value is determin

Question

Which of the following statements is correct? (a) An option's value is determined by its exercise value, which is the market price of the stock less its striking price. Thus, an option can't sell for more than its exercise value. (b) The market value of an option depends in part on the option's time to maturity and also on the variability of the underlying stock's price. (c) The market value of an option depends in part on the option's price at maturity and also on the variability of the underlying stock's cost. (d) The potential loss on an option decreases as the option sells at higher and higher prices because the profit margin gets bigger.

Explanation / Answer

(b) The market value of an option depends in part on the option's time to maturity and also on the variability of the underlying stock's price

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.