The size of an option's speculative premium will be influenced to a large extent by the volatility of the underlying asset.

Question

Quizplus · Accepted Answer

This statement is true. The higher the volatility of the underlying asset, the higher the potential for large price movements, and hence a higher likelihood of the option resulting in a profit. Therefore, the premium for a more volatile underlying asset will be higher due to the increased potential for speculative gains.

The Size of an Option's Speculative Premium Will Be Influenced