An increase in the exercise price, all other things held constant, will ________ the premium on call options.
A) increase
B) decrease
C) increase or decrease
D) Not enough information is given.

Question

Quizplus · Accepted Answer

The exercise price is the price at which the underlying asset can be bought or sold with a call or put option. As the exercise price increases, the option becomes less valuable because it is less likely to be in-the-money (profitable). Therefore, the premium on call options will decrease.

An Increase in the Exercise Price, All Other Things Held