Options on small stocks normally have higher premiums than options on large stocks because small stocks typically are more volatile.

Question

Quizplus · Accepted Answer

Options pricing is influenced by the volatility of the underlying asset; higher volatility increases the premium because there's a greater chance of the option ending in the money. Small stocks are generally more volatile than large stocks, leading to higher premiums for their options.

Options on Small Stocks Normally Have Higher Premiums Than Options