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Exam: Intermediate DeFi Options Concepts

A measure of how adverse the market conditions will be over the next year.

An estimate of how uncertain and unpredictable the price of an asset will be in the future.

A measure of how much the price of an asset has changed over a period in time.

What measures the portion of an option's value that is derived from time left until expiration?

Yes, as long as the difference between strike price and underlying asset price is great enough.

No. OTM means out-of-the-money, and an OTM option cannot be exercised for a profit.

Sometimes, as long as the premium wasn't too high.

Can an OTM option be exercised for a profit?

Greek that measures the rate of change in the option price relative to changes in the underlying asset price.

Greek that measures the rate of time decay in an option's value.

Greek that measures the sensitivity of an option's price relative to changes in implied volatility.

No. A high implied volatility has no correlation to an option's chance of expiring ITM.

No, implied volatility has nothing to do with price action.

Yes. Implied volatility directly correlates to an option's chance of expiring ITM. This is because a high implied volatility increases the likelihood of an option reaching strike price, as underlying asset price is more prone to movement.

Does a call option with a high implied volatility have a higher chance of expiring ITM?

3.5 Exam: Intermediate DeFi Options Concepts

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