An option can be priced at less than zero because it can potentially generate a large profit for its owner.

Name: An option can be priced at less than zero because it can potentially generate a large profit for its owner.
Brand: Quizplus
Rating: 4.8 (36 reviews)

Question

Quizplus · Accepted Answer

Options cannot be priced at less than zero because their price (premium) represents the cost to purchase the option, not the potential profit or loss, and the cost cannot be negative.

An Option Can Be Priced at Less Than Zero Because