Exchange-traded options are liquid because they are standardized in terms of:

Question

Quizplus · Accepted Answer

Exchange-traded options are standardized in terms of expiration dates, exercise prices, and quantity of the underlying asset. This standardization allows for greater liquidity because it makes it easier for investors to buy and sell options with each other. Additionally, the standardized options are often backed by a clearinghouse, which means that counterparty risk is reduced. Therefore, all options in the exchange are standardized, making the option contracts highly liquid.

Exchange-Traded Options Are Liquid Because They Are Standardized in Terms