Chapter 03 · Section 3.1
The components of the premium
What are the two major components of the premium?
a) Intrinsic value and Time to expiration.
b) Intrinsic value and Price of the underlying asset.
c) Time to expiration and Exercise price.
d) Time value and Intrinsic value.
Time to expiration is one of the three factors which influence the time value.
The price of the underlying asset is useful to determine the intrinsic value of the premium.