Which of the following statements is CORRECT?
A) An option's value is determined by its exercise value,which is the market price of the stock less its strike price.Thus,an option can't sell for more than its exercise value.
B) As a stock's price increases,the premium portion of an option on that stock increases because the difference between the stock price and the fixed strike price increases.
C) If the company is consistently profitable,its call options will always be in the money.
D) The market value of an option depends in part on the option's length of time until expiration and on the variability of the underlying stock's price.
E) The potential loss on an option decreases as the option sells at higher and higher prices because the profit margin becomes larger.

Question

Quizplus · Accepted Answer

The market value of an option depends on various factors, including the time until expiration and the stock price's variability. Options that have more time until expiration and are on more volatile stocks tend to have higher market values. Factors such as interest rates and dividends also play a role in determining an option's market value.

Which of the Following Statements Is CORRECT