The value of an option is equal to the:
A) intrinsic value minus the time premium.
B) time premium plus the intrinsic value.
C) implied standard deviation plus the intrinsic value.
D) summation of the intrinsic value, the time premium, and the implied standard deviation.
E) summation of delta, theta, vega, and rho.

Question

Quizplus · Accepted Answer

The value of an option is composed of two main components: its intrinsic value, which is the difference between the option's strike price and the underlying asset's current price, and its time premium, which accounts for the remaining time until expiration. The sum of these two gives the total value of the option.

The Value of an Option Is Equal to The