The ________ is the sum of the option's intrinsic value and a premium over intrinsic value that is often referred to as the ________.

Question

Quizplus · Accepted Answer

The option price is composed of the intrinsic value (the difference between the current stock price and the strike price) and the premium over intrinsic value, which is referred to as the time value or time premium. This premium is paid for the potential for the option to increase in value before expiration due to factors like volatility and time decay.

The ________ Is the Sum of the Option's Intrinsic Value