The most valid relationship between the values of European calls ( $C _ { E }$ ),American calls ( $C _ { A }$ ),shout call options ( $C _ { S }$ ),and lookback calls ( $C _ { L }$ )is as follows:
A) $C _ { A } \leq C _ { S } \leq C _ { L }$
B) $C _ { E } \leq C _ { L } \leq C _ { S }$
C) $C _ { S } \leq C _ {E } \leq C _ { A }$
D) $C _ { A } \leq C _ { L } \leq C _ { S }$

Question

Quizplus · Accepted Answer

American call options can be exercised at any time before expiration, which makes them at least as valuable as European calls, which can only be exercised at expiration. Shout options, which allow the holder to lock in a certain profit while maintaining the possibility of further gains, would logically be more valuable than standard American calls because they offer more flexibility and potential upside. Lookback options are even more valuable because they allow the holder to "look back" over the life of the option and choose the most favorable exercise price, ensuring the maximum possible payoff. Therefore, the relationship $C _ { A } \leq C _ { S } \leq C _ { L }$ correctly reflects the hierarchy in terms of option value.

The Most Valid Relationship Between the Values of European Calls CEC _ { E }CE​

The Most Valid Relationship Between the Values of European Calls $C _ { E }$