SIE practice questionhardOption premiums
Which factor does NOT directly affect the premium of an equity option?
- AInterest rates
- BVolatility of the underlying stock
- CTime to expiration
- DCurrent cash dividends✓ Correct answer
Explanation
Why D — Current cash dividends
While expectations of dividends can influence option pricing, the current cash dividend amount does not directly affect the option premium. Premiums are mainly set by volatility, time, and rates.
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