The Two Parts That Make Up an Option's Price Are

question 46

Multiple Choice

The two parts that make up an option's price are:

• A) extrinsic value and the time value of the option.
• B) the commission and the time value of the option.
• C) the intrinsic value and the time value of the option.
• D) the price of the underlying asset and the time value of the option.

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Definitions:

Prototype

An original model or preliminary version from which other forms are developed or copied.

Normative

Relating to principles or rules of what is considered right and wrong, often used in economics to express subjective or value-based judgments.

Other Things Equal

A principle in economic models known as ceteris paribus, which means holding all other variables constant to isolate the effect of one variable.

Variables

Elements, factors, or quantities that can change or have different values in a given situation or analysis.