The two parts that make up an option's price are:
A)Extrinsic value and the time value of the option.
B)The commission and the time value of the option.
C)The intrinsic value and the time value of the option.
D)The price of the underlying asset and the time value of the option.

Question

Quizplus · Accepted Answer

An option's price can be broken down into two parts: intrinsic value and time value. Intrinsic value is the difference between the strike price and the current market price of the underlying asset, while time value is the premium paid for the ability to buy or sell the asset at a specified price in the future. Therefore, the correct answer is C.

The Two Parts That Make Up an Option's Price Are