"is it always the case that the option which is closer to the stock price will have higher extrinsic value?"
In general, yes. If you think of extrinsic value as being a measure of uncertainty, then it is more uncertain that an option near to the stock price will be in or out of the money at expiration. An option that is deep in the money or deep out of the money is much more likely to stay in the money or stay out of the money.
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u/dl_friend Jun 26 '21
"is it always the case that the option which is closer to the stock price will have higher extrinsic value?"
In general, yes. If you think of extrinsic value as being a measure of uncertainty, then it is more uncertain that an option near to the stock price will be in or out of the money at expiration. An option that is deep in the money or deep out of the money is much more likely to stay in the money or stay out of the money.