Series 7 practice questioneasyOptions — LEAPS vs Standard Options
Which statement is TRUE regarding LEAPS options?
- AThey are only available for index options
- BThey do not trade on listed exchanges
- CThey can only be exercised at expiration
- DThey typically have higher premiums than standard options due to greater time value✓ Correct answer
Explanation
Why D — They typically have higher premiums than standard options due to greater time value
LEAPS have higher premiums than shorter-term options because they have more time value — the additional months or years until expiration give the underlying stock more time to move favorably. LEAPS are available on both individual equities and indices, are American-style (for equities), and trade on listed exchanges.
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