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Finra Exam Series-7 Topic 5 Question 95 Discussion

Actual exam question for Finra's Series-7 exam
Question #: 95
Topic #: 5
[All Series-7 Questions]

In comparing the premium cost of a LEAPS option with a premium of a traditional option on the same security and same strike price, which of the following is generally true?

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Suggested Answer: B

the LEAPS premium will be higher than the traditional option premium. Because LEAPS have a longer time until expiration than traditional options, the premium should be higher.


by Valentine at Aug 24, 2024, 09:51 AM

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Sunshine
1 months ago
Haha, LEAPS premiums 'don't consider time value'? What kind of nonsense is that? Of course they do, that's like the whole point of LEAPS!
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Desmond
26 days ago
Haha, LEAPS premiums 'don't consider time value'? What kind of nonsense is that? Of course they do, that's like the whole point of LEAPS!
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Patrick
28 days ago
C) the premium for the traditional option will be higher than the LEAPS option premium
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Carlene
1 months ago
B) the LEAPS premium will be higher than the traditional option premium
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Noah
1 months ago
A) the premiums will be approximately the same
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Page
2 months ago
I don't know, I'm kind of torn on this one. The traditional option might have a higher premium if the time value component is really small compared to the intrinsic value.
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Ora
2 months ago
Yeah, LEAPS options usually have higher premiums because of the longer expiration date.
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Demetra
2 months ago
I think the LEAPS premium will be higher than the traditional option premium.
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Lizette
2 months ago
That's a good point, the time value of LEAPS options could make their premiums higher.
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Shawna
2 months ago
But LEAPS options have longer expiration dates, so they should be more expensive, right?
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Angelica
2 months ago
Yeah, that's what I was thinking too. The LEAPS option gives you more time to play with, so the premium should reflect that.
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Sheridan
2 months ago
Yeah, that makes sense. Time value is an important factor in option pricing.
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Shad
2 months ago
LEAPS options are usually more expensive because they give you more time.
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Lizette
3 months ago
I disagree, I believe the LEAPS premium will be higher than the traditional option premium.
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Shawna
3 months ago
I think the premium for the traditional option will be higher than the LEAPS option premium.
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Dona
3 months ago
The LEAPS option should have a higher premium, right? I mean, it's got a longer time to expiration, so the time value component is going to be bigger.
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Cheryl
2 months ago
The time value component does play a big role in determining the premium of a LEAPS option.
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Nieves
2 months ago
LEAPS options do have a higher premium due to the longer time to expiration.
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Francisca
2 months ago
Yes, that's correct. The LEAPS premium will be higher than the traditional option premium.
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