SIE practice questioneasyTime value
If an option is trading above its intrinsic value, the extra amount is called:
- ATime value✓ Correct answer
- BPremium
- CStrike price
- DParity
Explanation
Why A — Time value
Time value is the portion of an option's premium above intrinsic value. Premium is the total price, strike is the exercise price, and parity is when intrinsic value equals the premium.
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