Why do options prices rise the further out

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Reference no: EM131305220

Go to finance.yahoo.com and enter the name of your favorite stock (Apple, Microsoft, Google, or whatever) in the Get Quotes box at the top left of the screen. As you enter the stock name, notice the stock ticker symbols and click on the symbol for your chosen stock. Select the Options tab on the left side of the screen. Notice how Yahoo! highlights the options that are in the money. Answer the following questions for this stock.

a. What is the difference in price between the call and put options for this month, next month, and this month next year?

b. Why do options prices rise the further out the expiration date is?

c. Of the call and put options that expire the soonest, which options have the highest volume? Can you use the data on volume to determine anything about the direction that investors expect the price of the stock to go? Briefly explain.

Reference no: EM131305220

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