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:

Cost Curves

Graphs in economics that show how the cost of producing a good or service varies with the quantity produced.

Total Costs

The sum of all expenses incurred by a business in producing goods or services, including both fixed and variable costs.

Profit Maximizing

The process or strategy employed by a firm to determine the price, output level, or operational scale that leads to the highest possible profit.

Efficient Level

The optimum point at which a particular function, operation, or activity is most effective or produces the best results with the least waste of resources.