SIE practice questionmediumOption premiums
Which option is most likely to have the highest time value, all else equal?
- AA put that is far out of the money and close to expiration
- BA call that is far out of the money
- CA call with the longest time until expiration✓ Correct answer
- DA call with a short time to expiration
Explanation
Why C — A call with the longest time until expiration
Longer time until expiration generally increases an option's time value, all else equal. Short-dated or far out-of-the-money options usually have less time value.
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