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Finra Series-7 Exam - Topic 4 Question 11 Discussion

Which of the following is true about option prices?
D) premiums on options of volatile stocks are usually larger than on less volatile stocks
A) premiums on options for listed stocks are usually greater than on unlisted stocks
B) premiums on options of higher-priced stocks are usually greater than on lower-priced stocks
C) premiums on options of well-known companies are usually larger than on lesser-known companies

Finra Series-7 Exam - Topic 4 Question 11 Discussion

Actual exam question for Finra's Series-7 exam
Question #: 11
Topic #: 4
[All Series-7 Questions]

Which of the following is true about option prices?

Show Suggested Answer Hide Answer
Suggested Answer: D

premiums on options of volatile stocks are usually larger than on less volatile stocks. The likelihood of exercise increases with the volatility of a stock. Therefore, a higher premium is demanded.


by Merlyn at May 09, 2022, 02:01 AM

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Nicolette
9 months ago
I agree with A and C, but D feels a bit off to me.
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Benton
10 months ago
Wait, are we sure about B? Higher price doesn’t always mean higher premium.
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Maryln
10 months ago
D makes sense too; volatility usually drives up premiums.
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Kirk
10 months ago
I think C is spot on. Well-known companies attract more interest.
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Vanesa
10 months ago
A is definitely true! Listed stocks have more liquidity.
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Monte
10 months ago
I’m leaning towards D as well, but I’m a bit confused about how much volatility really affects the premiums compared to other factors.
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Gracia
11 months ago
I practiced a question similar to this, and I think C makes sense because well-known companies tend to have more demand.
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Edna
11 months ago
I’m not too sure, but I feel like A could be true since listed stocks have more liquidity.
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Hoa
11 months ago
I think I remember that option premiums are influenced by volatility, so maybe D is the right choice?
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Jerry
11 months ago
Okay, I think I've got this. Deposit insurance protects funds on deposit if the financial institution fails, and it can be provided by the FDIC or NCUA. So the answer is definitely A. Deposit Insurance.
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Man
11 months ago
Option D sounds like the best answer to me. Testing early helps identify and fix defects quickly, which reduces the overall cost of development.
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Cassandra
11 months ago
Ah, I remember learning about this in class. The three classes are owner/group/world, so I'll select option A.
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