Standardized strike prices and expiration dates in the option market:
A)allows for more efficient trading strategies.
B)lowers the time premiums.
C)allows hedgers, speculators, and arbitrageurs to all operate together.
D)A and C

Question

Quizplus · Accepted Answer

This standardization of expiration dates and strike prices creates more certainty when buying and selling options in a changing market and allows more efficient trading strategies because of better coordination between stock prices, strike prices, and expiration dates. Dividends no longer affect the option contract as they did in the unlisted market. Transactions occur at arm's length between the buyer and seller without any direct matchmaking needed on the part of the broker. The ultimate result of these changes in the option market is a highly liquid, efficient market where speculators, hedgers, and arbitrageurs all operate together.

Standardized Strike Prices and Expiration Dates in the Option Market