For a given options contract, the options premium will be smaller
A)the lower the strike price relative to the spot price for call options.
B)the farther away the expiration date.
C)the lower the strike price relative to the spot price for put options.
D)the higher the strike price relative to the spot price for put options.

Question

Quizplus · Accepted Answer

When the strike price for put options is lower than the spot price, the put option becomes more valuable since it allows the holder to sell the underlying asset at a higher price than the market price. Therefore, the options premium will be higher. The opposite is true for call options, where a lower strike price would make the option more valuable, thus increasing the premium. Therefore, A is incorrect. The expiration date does not affect the intrinsic value of the option, but it does affect the time value, which decreases as the expiration date approaches. Therefore, B is incorrect. D is also incorrect because higher strike prices for put options make the option less valuable, resulting in a lower premium.

For a Given Options Contract, the Options Premium Will Be