1. An option contract’s market value has two main sources: call
value and put value
true or false
2. American option prices increase with the amount of time to
expiration.
true or false
1. False. An option contract's market value has multiple factors, including the underlying asset price, strike price, time to expiration, interest rates, and implied volatility. Call value and put value are components of an option's market value, but they are not the only sources.
2. True. American option prices generally increase with the amount of time to expiration. The longer the time until expiration, the greater the probability that the option will be profitable, and hence, the higher the price of the option.
1. True. An option contract's market value consists of both the call value and the put value. The call value represents the potential profit if the option is exercised to buy the underlying asset, while the put value represents the potential profit if the option is exercised to sell the underlying asset.
2. True. American option prices typically increase as the amount of time to expiration increases. This is because a longer expiration period allows for more time for the underlying asset's price to potentially move in a favorable direction, increasing the chances of the option being in-the-money.