Both call and put option premiums are affected by the level of the existing spot rate relative to the strike price, the length of time before the expiration date, and the potential variability of the currency.

Question

Quizplus · Accepted Answer

This statement is true. The spot rate relative to the strike price determines how likely the option is to be exercised and therefore affects the premium. The length of time before expiration and potential variability of the currency (represented by volatility) also impact the premium.

Both Call and Put Option Premiums Are Affected by the Level