SIE practice questionhardTime value
Which scenario will maximize an option’s time value?
- AOut-of-the-money with 1 week to expiration
- BDeep in-the-money with 1 week to expiration
- CAt-the-money with 1 day to expiration
- DAt-the-money with several months until expiration✓ Correct answer
Explanation
Why D — At-the-money with several months until expiration
Time value is highest when at-the-money and far from expiration. Deep-in/out-of-the-money or close-dated contracts have less time value.
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 covered call is most appropriate for an investor who believes:
- If the market price equals the strike price, the option’s intrinsic value is:
- Buying a protective put most benefits an investor who is:
- A trader is short 2 ABC 40 puts at $3, and ABC falls to $33. What is the total loss if exercised?
- A long straddle is most profitable when:
- An investor purchases a XYZ Oct 80 call for $7 when XYZ is $85, then sells the call for $12 the next week. What is…
- A bull call spread strategy is designed to:
- Vega measures an option's sensitivity to changes in: