An option's value will never be less than zero because:
A) the intrinsic value is always less than zero.
B) the option seller is required to make up any shortfall faced by the option buyer.
C) an option holder will never make an additional payment to exercise the option.
D) the time value of the option is always less than zero.

Question

Quizplus · Accepted Answer

An option holder pays a premium to purchase an option and will never make an additional payment to exercise the option. Therefore, the option's value will never be less than zero. Choices A, B, and D are incorrect because they are not true statements.

An Option's Value Will Never Be Less Than Zero Because