Intermediate

Option Pricing Quiz

By Dennis Bosmans · Updated June 2026 · 2 min read · Risk disclaimer

Every option price splits into two parts. These six questions check that you can take an option apart and see what you are really paying for.

Pick an answer for each question — your score appears at the end.

1. Question 1An option’s price equals intrinsic value plus…

   DividendExtrinsic (time) valueMarginInterest

   Price = intrinsic value + extrinsic (time) value.

2. Question 2The intrinsic value of a call equals…

   Strike − stockmax(stock − strike, 0)Premium − strikeAlways zero

   A call’s intrinsic value is the stock price minus the strike, floored at zero.

3. Question 3As expiration approaches, an option’s time value…

   GrowsDecays toward zeroStays constantTurns negative

   Time value erodes to zero by expiration — only intrinsic value remains.

4. Question 4An out-of-the-money option’s price is made up entirely of…

   Intrinsic valueExtrinsic valueDividendsMargin

   With no intrinsic value, an OTM option is 100% time (extrinsic) value.

5. Question 5Time decay tends to accelerate…

   Right after purchaseSteadily and linearlyAs expiration nearsNever

   Theta accelerates in the final weeks, fastest for at-the-money options.

6. Question 6All else equal, a longer-dated option costs…

   MoreLessThe sameNothing

   More time means more opportunity to move, so more extrinsic value.

Educational use only. Quotes are delayed ~15 minutes and nothing here is financial advice. Options trading involves substantial risk of loss. Privacy Policy · Terms & Conditions.