SIE practice questioneasyTime value
Time value in an option premium refers to:
- AThe amount by which premium exceeds intrinsic value✓ Correct answer
- BThe strike price
- CThe stock's dividend
- DThe market price of the underlying security
Explanation
Why A — The amount by which premium exceeds intrinsic value
Time value is the extra amount in the premium above intrinsic value, reflecting future potential. The other choices are unrelated to time value.
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