At expiration, an option
1) is worth its intrinsic value
2) has no time premium
3) may be exercised by the buyer but not by the writer
A)1 and 2
B)1 and 3
C)2 and 3
D)all three

Question

​At expiration, an option
1) is worth its intrinsic value
2) has no time premium
3) may be exercised by the buyer but not by the writer
A)​1 and 2
B)​1 and 3
C)​2 and 3
D)​all three

Quizplus · Accepted Answer

At expiration, an option is indeed worth its intrinsic value because there's no time left for the option to gain value from potential market movements, which means it has no time premium. Additionally, only the buyer (holder) of the option has the right to exercise it, not the writer (seller).

​At Expiration, an Option

At Expiration, an Option