The ____ the existing spot price relative to the strike price, the ____ valuable a call option will be.
A) higher; less
B) higher; more
C) lower; less
D) lower; more

Question

Quizplus · Accepted Answer

The higher the existing spot price relative to the strike price, the more valuable a call option will be. This is because a call option gives the holder the right to buy the underlying asset at the strike price, and if the spot price is higher, the option holder could potentially make a profit by exercising the option and buying the asset at the strike price, then selling it at the higher spot price. Therefore, a higher existing spot price relative to the strike price increases the potential profit for the option holder and makes the option more valuable.

The ____ the Existing Spot Price Relative to the Strike