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A graduate student in astronomy needs to measure the mass of a spiral galaxy she is studying for her PhD thesis. Which of the following observations would be important for her to make?
Time Value
The portion of an option's price that exceeds its intrinsic value, representing the potential for additional value based on time remaining until expiration.
Out-of-the-money
A term used in options trading to describe an option that would not profit if exercised immediately, i.e., a call option with a strike price above the underlying asset's price or a put option below it.
In-the-money
An option is in-the-money when it has intrinsic value, meaning for a call option, the market price is above the strike price, and for a put option, below the strike price.
Black-Scholes Model
A mathematical model used for pricing European-style options and assessing the options' market value based on factors such as volatility, risk-free rate, and time to expiration.
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