Series VIIIMediumOptions Contracts

The premium of an option can be decomposed into:

ADelta value and gamma value
BIntrinsic value and time valuecheck_circle
CStrike value and margin value
DSpot value and futures value

Correct answer

B. Intrinsic value and time value

lightbulbDetailed Solution

Option premium = intrinsic value + time value. Intrinsic value is the in-the-money amount (never negative). Time value is the remaining premium reflecting the chance the option gains value before expiry; it decays to zero at expiry, so an ATM/OTM option's premium is entirely time value.

Reference: NISM Series VIII Equity Derivatives, Chapter 3.

Practice more Series VIII questions

Timed mocks and adaptive practice — free.

Start Practising Free

More from Series VIII

See all Series VIII questionsarrow_forward

Keep going

One answered question is a start. These hubs cover the rest of the syllabus.

timerFree Mock Quizarrow_forwardA timed quiz you can take right now in the browser — no sign-up, instant score.menu_bookStudy Notesarrow_forwardChapter-by-chapter explainers written to be read in five minutes, not five hours.translateFinance Glossaryarrow_forwardEvery SEBI and markets term you'll meet in the syllabus, defined in plain English.routeLearning Pathwaysarrow_forwardGuided routes into real roles — Research Analyst, Mutual Fund Distributor and more.grid_viewAll 26 NISM Seriesarrow_forwardBrowse every certification, its syllabus and who each one is actually for.descriptionThe NISM Guidearrow_forwardRegistration, fees, pass marks and exam-day logistics, start to finish.