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DERIVATIVES-BASICS4 MIN READ

Sort Moneyness and Premium Pieces

Classify option terms related to moneyness, premium composition, and long/short obligations.

Sort each option statement into the concept it describes. Moneyness Premium piece Long or short obligation A call with strike below the current stock price A put with strike above the current stock price Strike roughly equals the current underlying price The amount an option is in-the-money right now Premium above intrinsic value caused by time, volatility, and other inputs The buyer owns a right and can lose the premium paid The writer receives premium and has an obligation if assigned Premium Obligation OTM equals worthless OTM equals no intrinsic value today

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