High Volatility Is Bad for Option Holders Because It Increases

question 48

True/False

High volatility is bad for option holders because it increases the probability that the option will expire out-of-the-money.

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Definitions:

Random Variable

A variable whose possible values are outcomes of a random phenomenon, often used in probability and statistics.

Soft Drink

A non-alcoholic beverage usually carbonated, sweetened, and flavored, including sodas and cola drinks.

Different Prices

The phenomenon that occurs when a seller sets varied prices for the same product in different markets or purchase contexts, often reflecting variations in demand elasticity.

Risk-Loving

A personality trait or behavior of individuals who prefer or seek out risk in their investment choices, with the potential for high returns.