The value of a stock option results from the benefit element and the time value element.

Question

Quizplus · Accepted Answer

The benefit element of a stock option is the difference between the market price of the underlying stock and the option's exercise price. The time value element represents the potential for the stock price to move in favor of the option holder before expiration. Together, these two elements determine the value of a stock option.

The Value of a Stock Option Results from the Benefit