Podcast
Questions and Answers
What influences the value of an option?
What influences the value of an option?
- Underlying asset's price, time until expiration, and interest rates only
- Underlying asset's price, strike price, time until expiration, volatility, and interest rates (correct)
- Underlying asset's price and strike price only
- Underlying asset's price, strike price, and expiration date only
When is an option 'at the money'?
When is an option 'at the money'?
- When the asset's price is less than the strike price
- When the asset's price is equal to the strike price (correct)
- When the option is not profitable to exercise
- When the option is profitable to exercise
What does it mean when an option is 'in the money'?
What does it mean when an option is 'in the money'?
- The option has expired
- Not profitable to exercise
- The strike price is equal to the asset's price
- Profitable to exercise (correct)
Flashcards
Option Value Factors
Option Value Factors
Factors influencing an option's price include the underlying asset's price, strike price, expiration time, volatility, and interest rates.
At the money option
At the money option
An option where the underlying asset price equals the strike price.
In the money option
In the money option
An option profitable to exercise now.
Study Notes
Influences on Option Value
- The value of an option is influenced by several factors, including the underlying stock price, volatility, time to expiration, interest rates, and dividends.
Option Moneyness
- An option is 'at the money' when the strike price is equal to the current market price of the underlying asset.
- An option is 'in the money' when the strike price is favorable in comparison to the current market price of the underlying asset, resulting in a profit for the option holder.
- For call options, 'in the money' means the strike price is below the current market price, while for put options, it means the strike price is above the current market price.
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Description
Test your knowledge of options trading with this quiz. Explore the factors that influence the value of an option, including underlying asset price, strike price, time until expiration, volatility, and interest rates. Understand the concepts of "in the money," "at the money," and "out of the money" options.
