SIE practice questioneasyOption premiums
An option's premium is defined as:
- AThe value at expiration
- BThe difference between strike price and market price
- CThe cost to buy the option contract✓ Correct answer
- DThe price at which the stock trades
Explanation
Why C — The cost to buy the option contract
The premium is the market price paid to acquire the option. B describes intrinsic value, C deals with final settlement, and D is unrelated.
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