For a given call option price, which of the following statements is correct?
A)The closer the strike price is to the current price of the underlying asset, the smaller the time value of the option.
B)The closer the strike price is to the current price of the underlying asset, the larger the time value of the option.
C)As the strike price approaches the price of the underlying asset, the time value of the option approaches zero.
D)As the strike price approaches the price of the underlying asset, the intrinsic value of the option increases and the time value of the option decreases.

Question

Quizplus · Accepted Answer

The time value of an option is generally larger when the strike price is closer to the current price of the underlying asset, as there is more uncertainty and potential for the option to be in-the-money.

For a Given Call Option Price, Which of the Following