SIE practice questionmediumTime value
If an option is deep in the money and close to expiration, its premium will consist primarily of which?
- AInterest rate value
- BTime value
- CPar value
- DIntrinsic value✓ Correct answer
Explanation
Why D — Intrinsic value
Deep-in-the-money options near expiration are almost all intrinsic value; little time value remains.
Turn it into reps
Reading one answer is not the same as being ready
Lucky the Banker is a free practice app with 1,867+ SIE questions, weak-area tracking, and timed mock exams. No credit card, no paywall.
Spot an error in this question or explanation? Tell us — we fix these fast.
Related Options questions
- A short straddle profits when:
- A DEF Jul 60 put is trading for $3. DEF stock is currently $55. What is the intrinsic value of the put?
- The maximum loss for a short uncovered call writer is:
- An investor sells an uncovered (naked) put. What is the maximum potential loss?
- Breakeven on a short call is calculated as:
- If ABC is trading at $56 and the ABC 55 call is trading at $2.50, what is the intrinsic value?
- If an option expires worthless, the seller’s result is:
- A trader wants to monitor the impact of time decay on an option’s price. Which Greek should they focus on?