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FINRA Series 7

Category - Series 7

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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?

the premiums will be approximately the same
the LEAPS premium will be higher than the traditional option premium
the premium for the traditional option will be higher than the LEAPS option premium
LEAPS premiums do not consider time value

Explanation

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.

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FINRA Series 7

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FINRA Series 7

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