Chapter 03 · Section 3.1
Premium
Time to Expiration and Volatility of the Underlying Asset Look at the following two options:
Option A Option B
Option type: American Call American Call
Exercise price: $ 290 $ 290
Underlying asset: stock A stock A
Price of stock A: $ 300 $ 300
Expiration date: June September
Today's date: February February
Should the premium of option B be greater than the premium of option A? Please answer yes or no.
b) yes
No. The further away the expiration date, the greater the time value in the premium.
a) no
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