Which of the following is true about option prices?
A)premiums on options for listed stocks are usually greater than on unlisted stocks
B)premiums on options of higher-priced stocks are usually greater than on lower-priced stocks
C)premiums on options of well-known companies are usually larger than on lesser-known companies
D)premiums on options of volatile stocks are usually larger than on less volatile stocks

Question

Quizplus · Accepted Answer

premiums on options of volatile stocks are usually larger than on less volatile stocks. The likelihood of exercise increases with the volatility of a stock. Therefore, a higher premium is demanded.

Which of the Following Is True About Option Prices