easy · FRM Part 1 Financial Markets and Products
What is the primary reason why time value is greatest for an at-the-money (ATM) option?
- The uncertainty regarding whether the option will expire ITM or OTM is at its peak.
- ATM options have the highest intrinsic value.
- ATM options are the cheapest to buy, attracting the most speculators.
- Interest rates have a larger impact on ATM options than on ITM options.
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